Gold prices post first loss in 3 sessions after U.S. inflation report

Price action

• Gold for June delivery
  GC00,
  -0.21%

  GCM23,
  -0.21%
  declined by $5.80, or 0.3%, to settle at $2,037.10 per ounce on Comex after registering back-to-back session gains.

• Silver for July delivery
  SI00,
  -1.00%

  SIN23,
  -1.00%
  settled down by 24 cents, or 0.9%, to $25.66 per ounce.

• Platinum for July delivery 
  PLN23,
  -0.92%
  gained $3.10, or 0.3%, to $1,119.10 per ounce, while palladium for June delivery
  PAM23,
  +0.39%
  rose by $25.40, or 1.6%, to $1,605.10 per ounce.

• Copper for July delivery
  HGN23,
  +0.07%
  fell by 6 cents, or nearly 1.6%, to $3.84 per pound.

Market drivers

U.S. consumer prices rose 0.4 % in April, the Labor Department said Wednesday. That matched the increase expected by economists polled by The Wall Street Journal. Over the past 12 months, however, consumer inflation increased 4.9% and that’s down from a 5% year-on-year increase in March. The annual inflation reading is below 5% for the first time in two years.

Softness in the greenback followed the release of the data. The ICE U.S. Dollar index
DXY,
-0.02%
traded as low as 101.215, but has since pared its losses to trade down by less than 0.1% at 101.568 in Wednesday dealings.

Weakness in the dollar was “likely due to the admittance that while this data might not tell us enough about what the Fed is thinking, it at least provides some indication that the Fed will not be pushed to raise interest rates even higher in a hurry,” said Jameel Ahmad, chief analyst at CompareBroker.io, in a market update.

Still, anyone hoping that CPI data will provide guidance on the future outlook of U.S. interest rates “will have had their hopes dashed,” he said. The inflation headline number Wednesday “allows the Fed to continue to bide its time and wait for clarity from future economic data releases over the coming months.”

Fed policymakers will “ultimately enjoy the patience afforded to continue to watch economic data before making any decisions over the narrative on the future monetary policy outlook ahead,” Ahmad said.

Gold futures gave up the gains in saw in the wake of the CPI data to settle lower Wednesday.

Chintan Karnani, director of research at Insignia Consultants, told MarketWatch that the CPI numbers do “not confirm an interest-rate pause” in the June or July Fed meetings.

“Traders were disappointed after they could not get a sure view on timing interest rate cut and interest rate pause — hence the profit taking,” said Karnani.

Thursday’s U.S. producer price numbers are likely to “decide the fate” for interest rates, he said.

Still, gold futures have seen an impressive rise in recent trading. The most-active June gold futures contract traded as high as $2,056 on Wednesday. On Thursday, it traded as high as $2,085.40, the highest intraday level since the record intraday high from Aug. 7, 2020 at $2,089.20, according to Dow Jones Market Data.

“The move in gold is particularly inspired by the way in which buyers were able to defend the previous psychological resistance at $2,000 as support during recent trading sessions,” said Ahmad. “This provided a pat on the back to gold enthusiasts that the around 12% rally in the precious metal year-to-date still has potential fuel in the tank to continue driving further.”