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US consumer prices unexpectedly fell and the annual increase was the smallest in a year, reinforcing views that the disinflation trend was back on track and drawing the Fed another step closer to cutting interest rates.
Interest-rate futures prices reflected about an 85% chance of a rate cut at the Fed’s September meeting, compared with about a 70% chance seen before the data.
Non-yielding bullion’s appeal tends to shine when interest rates fall.
Following the US inflation data, the dollar dropped to a more than one-month low, making gold more attractive for other currency holders, while the benchmark US 10-year Treasury yield fell to a four-month low.
Fed chair Jerome Powell, over his two days of commentary before the Senate and House committees that oversee the central bank, indicated the Fed was edging closer to a rate cut decision.
“Given the overall trajectory on monetary policy and gold demand I think the bull run is not over yet,” said Zain Vawda, market analyst at MarketPulse by Oanda.
Meanwhile, spot silver climbed 1.7% to $31.34 per ounce, its highest since May 31. Platinum rose 1.2% to $1,001.25 and palladium gained 1.1% to $997.25.
Update: July 11 2024
This story has been update with the new gold price.
Reuters
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