Gold was up on Friday morning in Asia and is set for a small weekly gain. The slightly faster-than-expected rise in U.S. inflation drove investor bets that price pressures will be temporary and central bank support will remain in place.
Gold futures were up 0.33% to $1,902.70 by 1:05 AM ET (5:05 AM GMT), after hitting $1,916.64, the highest intraday level since Jan. 8, 2021, during the previous week.
U.S. inflation data released on Thursday said that the core consumer price index (CPI) grew by a higher-than-expected 3.8% year-on-year. It grew 0.7% month-on-month, which was above expectations but below April’s growth.
On the central bank front, investors continued to digest the European Central Bank (ECB)’s policy decision handed down on Thursday. ECB President Christine Lagarde also renewed a pledge on faster bond buying, even as officials admitted for the first time since 2018 that the euro-zone economy was no longer overshadowed by risks to its growth outlook.
The U.S. Federal Reserve is also due to hand down its policy decision in the following week.
The yellow metal hovered around the $1,900 mark as investors reacted to the latest CPI figures, indicating that they are buying into the Fed’s insistent view that inflation is temporary and that there will be no big changes in monetary policy in the short term.
“Despite the larger-than-expected U.S. CPI number, yields came under pressure following the report, which has provided support to gold,” ING Groep (AS:INGA) NV head of commodities strategy Warren Patterson told Reuters.
Investors are also looking ahead to the Fed’s Jackson Hole symposium scheduled from Aug. 26 to 28.
“We believe the Fed will likely continue to hold the view of transitory inflation at next week’s Federal Open Market Committee meeting, but language could change at Jackson Hole in late August, opening the door for a tapering announcement later in the year,” said Patterson.
In other precious metals, silver was steady at $27.96, while palladium slipped 0.5% and platinum inched down 0.1%. Investing.com