Gold edged up on Thursday on hopes that the US Federal Reserve would not raise interest rates anytime soon, although a surge in US Treasury yields following a sharp rise in April consumer prices capped gains. Spot gold was up 0.1 percent at USD 1,816.63 per ounce by 0546 GMT, after falling more than 1 percent in the previous session.
US gold futures eased 0.3 percent to USD 1,817.40.
”We’re still getting on the aftershock of that consumer price index release and the expectations now from the market that the Fed will be forced to do something about inflation,” IG Market analyst Kyle Rodda said.
The Fed, however, has been reiterating that inflation will be so transitory that it won’t have to worry about adjusting interest rates, he added. Data on Wednesday showed US consumer prices increased the most in nearly 12 years in April, intensifying concerns over rising inflation.
Fed Vice Chair Richard Clarida said the twin surprises of weak jobs growth and strong inflation in April has not dented the US central bank’s plans to keep its support for the economy-wide open.
”The Fed is probably quite focused on unemployment as a reason for keeping the narrative dovish,” Nicholas Frappell, global general manager at ABC Bullion, said.
The Fed pledged to leave borrowing costs unchanged until the economy reaches full employment, and inflation hits 2 percent and is on track to ”moderately” exceed that level for some time. ”Given the Flexible Average Inflation target, there is awareness that the Fed can allow for some inflationary room,” Frappell added.
Lower US interest rates put pressure on the dollar and bond yields, raising the appeal of non-yielding bullion. However, worries over rising inflation lifted benchmark US 10-year Treasury yields to their highest in more than a month, while the dollar held firm.
Palladium gained 0.9 percent to USD 2,881.61 per ounce. Silver was down 0.5 percent at USD 26.90 per ounce, while platinum was up 0.2 percent at USD 1,211.87.
