Gold prices end lower with a pause in Fed interest-rate hikes priced in

Price action

• Gold prices for August delivery
  GC00,
  +0.10%

  GCQ23,
  +0.10%
  shed $11.10, or 0.6%, to settle at $1,958.60 per ounce on Comex.

• Silver for July delivery
  SI00,
  +0.26%

  SIN23,
  +0.26%
  declined by 24 cents, or 1%, to $23.82 per ounce.

• Palladium for September delivery 
  PAU23,
  +0.14%
  gained $17.50, or 1.3%, to $1,358.60 per ounce, while July platinum
  PLN23,
  +0.02%
  fell by $13.40, or nearly 1.4%, to $981.90 per ounce.

• Copper for July delivery
  HGN23,
  +0.07%
  gained 8 cents, or 2.1%, to $3.83 per pound.

What’s happening

Data released Tuesday showed that the U.S. consumer prices edged up by 0.1% in May, matching the forecast of economists polled by The Wall Street Journal. The yearly rate of inflation slowed to 4% from 4.9%, marking the lowest level since March 2021.

Dollar-denominated prices for gold initially moved higher in the wake of the data as the U.S. dollar weakened against most major currencies, with the ICE U.S. Dollar index down 0.3% at 103.32 in Tuesday dealings.

The CPI came in as expected, showing a further deceleration in inflation, and “in a normal world, that would be bearish for gold, but the metal popped higher on the news as it bolstered the view that the Fed would announce a pause in rate hikes” on Wednesday, Brien Lundin, editor of Gold Newsletter, told MarketWatch.

But “as that pause is already factored into pricing, gold soon lost all of its gains and started to trade slightly lower,” he said. At the same time, he said the decline in the dollar should be bullish for gold.

“The bottom line is that the shifting cross-currents today are overshadowed by the Fed decision tomorrow, and that event will determine the near-term trends,” said Lundin.

In emailed commentary, EY Chief Economist Gregory Daco said the CPI data “doesn’t change the Fed outlook for a June rate hike skip, it illustrates the ‘should I stay, or should I go’ dilemma that the Fed faces when considering further rate increases.”

“Some Fed policymakers will interpret the persistent (and backward-looking) core inflationary pressure and an indication to ‘go’ on tightening, while others with more of a forward-looking policy framework will see justification to ‘stay’,” he said.