Gold climbs on dip-buying, Fed rate hike bets rise after US inflation data
Summary
Gold prices rose more than 1 percent on Friday, rebounding after recent losses as strong U.S. inflation data reinforced bets on a Federal Reserve rate hike next week. Spot gold climbed 1.2 percent to $4,366.69 per ounce, though it was still down about 1.4 percent for the week. Traders raised the implied chance of a rate hike to 87 percent from 67 percent before the inflation data. Silver, platinum and palladium also gained, while India demand was subdued and China investment demand remained strong.
Key Facts
- Spot gold rose 1.2 percent to $4,366.69 per ounce by 11:22 a.m. EDT, while U.S. gold futures gained 0.1 percent to $4,409.30.
- The U.S. Consumer Price Index increased 0.4 percent in August after edging up 0.1 percent in July, according to the Bureau of Labor Statistics.
- Traders were pricing in an 87 percent chance of a Fed rate hike at next week’s policy meeting, up from 67 percent before the inflation data.
- Spot silver rose 1.4 percent to $64.43 per ounce, platinum climbed 0.9 percent to $1,793.16 and palladium gained 2.5 percent to $1,313.50.
- Gold prices fell nearly 2 percent on Thursday after U.S. Producer Price Index data showed prices increased in line with expectations in August.
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Gold prices firmed over 1 percent on Friday, rebounding from recent losses and finding a short-term floor despite strong U.S. inflation data bolstering expectations of an interest rate hike by the Federal Reserve next week.
Spot gold rose 1.2 percent to $4,366.69 per ounce by 11:22 a.m. EDT (1522 GMT). The metal, however, was down about 1.4 percent for the week so far.
"Gold is recovering rapidly after a brief dip, as CPI data may be cementing expectations of a Fed rate hike next week. The volatility is somewhat muted, as market had a hike 70 percent priced in," said Tai Wong, an independent metals trader.
"Price action here suggests that gold is finding a short-term base after the recent retreat."
U.S. gold futures gained 0.1 percent to $4,409.30.
Prices fell nearly 2 percent on Thursday after the U.S. Producer Price Index data showed prices increased in line with expectations in August.
The Consumer Price Index increased 0.4 percent last month after edging up 0.1 percent in July, the labor department's Bureau of Labor Statistics said on Friday.
Oil prices fell on Friday, but remained on course for a weekly gain.
Higher oil prices stoke inflation fears, strengthening rate-hike bets. While gold is typically seen as an inflation hedge, higher interest rates diminish the appeal of non-yielding bullion.
Traders are pricing in an 87 percent chance of a rate hike at the Fed's policy meeting next week, up from 67 percent before the inflation data, according to the CME FedWatch Tool.
Gold demand in India was subdued this week as volatile prices discouraged buyers, while investment demand remained strong in top consumer China.
Spot silver rose 1.4 percent to $64.43 per ounce, but was down 2.6 percent for the week.
Platinum climbed 0.9 percent to $1,793.16 and palladium gained 2.5 percent to $1,313.50. Yet, they were set for a weekly loss.
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