Gold futures poised for highest finish since mid-June as data show another slowdown in U.S. inflation

By Myra P. Saefong and Joseph Adinolfi

Gold futures climbed on Wednesday, on track to mark their highest settlement since mid-June after monthly U.S. consumer-price index data showed another slowdown in inflation, raising the likelihood that the Federal Reserve may soon call an end to interest-rate hikes.

Price action

Market drivers

Prices of gold gained Wednesday after the U.S. June consumer price index rose by a modest 0.2%, with the rate of inflation slowing to the lowest since 2021. The increase was smaller than the 0.3% forecast of economists polled by The Wall Street Journal.

The yearly rate of inflation decelerated to 3% from 4% in the prior month. The last time inflation was this low was in March 2021.

The CPI release came in lower than expected while the core CPI release continued to disappoint,” said Jeff Klearman, portfolio manager at GraniteShares, who runs the GraniteShares Gold Trust (BAR).

“Gold prices, nonetheless, reacted positively…reflecting market sentiment that the Fed, though likely to maintain its plans for two more rate hikes, was nearing the end of its tightening cycle,” he told MarketWatch.

Though certain aspects of inflation remain relatively high, such as wage, rent and other services inflation, the overall trend has been lower, said Klearman.

Concerns focusing on the lagged effects of the Fed’s 10-consecutive rate increases, prior to the pause last month, especially with regards to the banking and real estate sectors but also with respect to debt-laden companies, “seems likely to push the Fed to act less aggressively going forward,” he said. “This, in turn, should provide impetus for lower rates…and a weaker U.S. dollar — both positive, supportive factors for the price of gold.”

-Myra P. Saefong

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07-12-23 1005ET

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