As US inflation figures fuel rate concerns, gold trades below two-week highs

13 Oct 2023 , 09:51 AM

A larger-than-expected increase in U.S. consumer prices reinforced chances that interest rates would stay high for longer, raising dollar and bond yields from their recent lows. Gold prices moved up on Friday but hovered below two-week highs achieved in the previous session.

Spot gold reached its highest level since September 27 on Thursday at $1,884.79 per ounce before rising 0.2% to $1,872.20 per ounce. Gold futures saw a 0.1% increase.

The demand for safe-haven bullion was increased by armed skirmishes between Israel and the Palestinian Islamist party Hamas. Gold is still on track to advance by more than 2% this week, the most since mid-March.

Investing in gold is regarded as a safe haven during uncertain economic times, but because it pays no interest, its appeal tends to diminish as interest rates rise.

After statistics on Thursday revealed that U.S. consumer prices grew in September amid an unexpected jump in rental costs, U.S. Treasury yields increased and the currency strengthened, while global stock markets declined.

Traders believe there is a better possibility that the U.S. Federal Reserve will raise interest rates again this year and maintain them higher for longer next year.

Susan Collins, president of the Federal Reserve Bank of Boston, said the most recent inflation numbers highlight uneven progress towards restoring price stability and reiterated her belief that the central bank may need to hike rates once more to battle inflation.

On Thursday, policymakers at the European Central Bank voiced cautious optimism that inflation was on the verge of returning to 2% even in the absence of further rate increases.

Spot silver increased by 0.3% to $21.90 an ounce, platinum decreased by 0.2% to $866.68, while palladium decreased by 0.4% to $1,139.73.

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