Gold Surges to Two-Month High on Inflation Data
The gold price surged to a two-month high on Wednesday after inflation data beat estimates. The report, which showed consumer prices rose 0.1% in July, was seen as a relief to the Fed, easing concerns about raising interest rates.
The price of gold futures rose 0.8% to $4,478 an ounce, continuing its rally for a fourth session. Traders reacted to the report with silver falling close to $64.769, off about 0.5%.
Lower expectations for rates and a weaker dollar bolstered gold prices. The annual inflation rate fell to 3.4% from 3.5% in June, while the core rate increased 0.2% month-on-month but fell 0.1% year-on-year to 2.5%. This lowered market expectations of a September rate hike.
Gold was a direct beneficiary of the slide in near-term rate expectations. With gold not paying interest, lower future rates make it less costly by opportunity. Gold futures moved up towards $4,478, getting close to the psychological $4,500 level.