The gold price is rising after a higher than expected reading of US inflation

Gold futures rose on Tuesday after data showed that US consumer prices rose for the fourth straight month in March and inflation reached its highest level in 2½ years. Precious metal is often seen as a hedge against inflation.

The consumer price index rose 0.6% in March, the government said Tuesday, led by rising oil costs. Economists polled by Dow Jones and The Wall Street Journal had predicted a 0.5% increase in CPI. Annual inflation rose from 1.7% to 2.6% in March.

The talk “came in slightly above expectations, an indication that the US economy is warming slightly more than expected,” Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund QGLDX,
-0.70%
MarketWatch told.

He pointed out that much of the inflationary pressures came from rising gasoline prices and that core inflation was more muted. “These changes will be largely temporary by economists and will lead to an unadjusted position from the Federal Reserve,” said Teed, who is also research director at Flexible Plan Investments Ltd.

Overall, “gold is responding positively to the news, but short-term price movements in the metal are not an indication of long-term trends,” he said.

June gold GC00,
+ 0.58%

GCM21,
+ 0.58%
rose $ 8.50, or 0.5%, at $ 1,741.20 an ounce, a day after the precious metal hit its lowest score for a most active contract since April 5, FactSet data shows.

“Inflation is likely to pick up further and the figures for the coming months may appear abnormally large as the base effects of the 2020 lockdowns distort the data,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, referring to disruptions in the monthly inflation figures that are the result. are of abnormally high or low levels in the period from a year ago.

“The Fed expects inflation to calm down after a temporary acceleration. However, the main risk is that their assumption turns out to be false and price pressures remain high. In fact, with consumer inflation expectations rising, this could translate into actual price increases, ”he said.

The movement for gold during the session so far is also as bond yields, which compete with gold demand for the port, dropped after the inflation data.

The 10-year treasury TMUBMUSD10Y,
1,647%
after CPI decreased by 1.5 basis points to about 1.66%. A drop in bond yields makes gold more attractive to investors because precious metals do not offer a coupon.

Meanwhile May silver SIK21,
+ 2.02%

SI00,
+ 2.02%
shed added 50 cents or 2% to $ 25.37 an ounce, down 1.8% a day ago.

Can copper HGK21,
+ 0.22%
0.3% added to $ 4.03 per pound. July platinum PLN 21,
-1.41%
fell 0.8% to $ 1,164.70 an ounce, while palladium PAM21 in June,
+ 0.90%
climbed 0.6% to $ 2,688.50 an ounce.

Source