Gold rebounds as US inflation worries cool

14 Jun 2024 , 08:47 AM

Even though the Federal Reserve had projected only one rate cut this year, expectations for two cuts in 2024 were heightened by weaker-than-expected U.S. producer inflation statistics, which caused gold prices to pare some of their losses on Thursday.

Spot gold was down 0.5% at $2,310.89 an ounce. Prior to the release of the report, prices dropped as low as $2303.84. At $2,326.90, gold futures were down 1.2%.

Amidst reduced energy costs, U.S. producer prices unexpectedly declined in May, suggesting a slowdown in inflation following a sharp increase in the first quarter.

The yield on the 10-year Treasury note fell to its lowest point since April 1, which made non-yielding bullion somewhat more appealing.

Traders increased their wagers to price in roughly 50 basis points of Fed policy easing (bps), or two-quarter percentage reduction by the end of this year, from 40 bps before to the PPI report, according to money market pricing.

Despite modest progress in inflation, the Fed kept interest rates unchanged on Wednesday and predicted only one rate reduction in 2024 as growth and unemployment remained at levels that are better than what the US central bank believes is long-term sustainable.

The consumer price index data released on Wednesday, which was unexpectedly flat in May, also showed a slowing in inflation. That caused gold to rise as much as 1% before it stopped rising and ended the day only 0.3% higher following the Fed’s hawkish press conference.

In other news, spot silver dropped 2.4% to $29.00 per ounce, palladium dropped 2.5% to $883.52, while platinum dropped 1.6% to $948.45.

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