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Gold Heads for Fifth Straight Gain After Moderate U.S. Core CPI

Bullion is being buoyed by demand for inflation hedges and haven assets amid Russia’s war in Ukraine and risks to global growth.

Gold Heads for Fifth Straight Gain After Moderate U.S. Core CPI
A worker handles an Argor-Heraeus SA one kilogram gold bar. (Photographer: Akos Stiller/Bloomberg)

Gold rallied for a fifth straight day as Treasury yields sank following core U.S. inflation data that rose less than expected. 

While headline U.S. consumer prices climbed in March by the most since late 1981 on a year-over-year basis, so-called core prices -- which strip out some volatile components -- increased 0.3% from a month earlier and 6.5% from a year ago, Labor Department data showed Tuesday. Benchmark 10-year Treasury yields declined from near the highest since 2018 following the print, as traders eased back bets on drastic action to contain prices pressures. The lower yields support gold, which rose to the highest in a month.

Expectations for rapid policy tightening have weighed on gold in recent weeks, even as bullion has been buoyed by demand for safe havens following Russia’s invasion of Ukraine. Investors have been concerned about the prospect of large rate hikes by the Fed as it seeks to contain the hottest inflation in decades.

The moderating core CPI indicates that “while the Fed and others will be tilting policy toward a more restrictive stance, there is a good chance that the shift may be a pragmatic one,” said Bart Melek, global head of commodity strategy at TD Securities. “This implies that real rates, a key determinant of gold price levels, may not move up as quickly as if core inflation was accelerating as quickly as the headline.”

Gold Heads for Fifth Straight Gain After Moderate U.S. Core CPI

Charles Evans, the Fed Bank of Chicago president who has long been one of the U.S. central bank’s more dovish policy makers, said an accelerated pace of interest-rate increases to combat inflation is worth debating. Meanwhile, Fed Governor Christopher Waller said it’s doing all it can to avoid “collateral damage” from raising interest rates, a “brute-force tool” that can act as a “hammer” on the economy. 

Spot gold gained 0.8% to $1,968.61 an ounce at 2:37 p.m. in New York, after rising as much as 1.3% earlier. Bullion for June delivery increased 1.4% to settle at $1,976.10 on the Comex. The Bloomberg Dollar Spot Index was up 0.1%. Palladium and platinum dropped, while silver advanced.

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