An employee arranges gold bangles in a display cabinet at a Chow Tai Fook Jewellery Group Ltd. store in Shanghai, China. (Photographer: Qilai Shen/Bloomberg)

Gold Gets Lifeline From Surprise Source: Cheap Flights and Cars

(Bloomberg) -- Gold bulls are finally catching a break, thanks to signs that inflation pressures aren’t building as fast as they had feared.

U.S. consumer prices rose by less than forecast in April as costs for automobiles and airfares declined, a government report showed Thursday. Earlier, the Bank of England kept the key interest rate on hold after a first-quarter slump, and said inflation will weaken faster than previously anticipated. The dollar slid, and bullion posted its first gain in four days.

Gold futures have posted three straight weekly losses as a stronger dollar, tighter monetary policy from the Federal Reserve and signs of resilient global economic growth sapped demand for the metal. Higher rates diminish the appeal of bullion because it doesn’t pay interest. The inflation figures come a day after a report showing U.S. wholesale prices rose less than expected.

Gold Gets Lifeline From Surprise Source: Cheap Flights and Cars

If U.S. consumer prices aren’t picking up steam, “we do not expect the Fed to remain hawkish when it comes to interest-rate hikes,” Naeem Aslam, chief market analyst at TF Global Markets in London, said in a telephone interview. “The Fed is data dependent.”

The 10-year breakeven rate, which has been near the highest since 2014, fell on Thursday. The breakeven inflation rate is the spread between yields on nominal and inflation-linked U.S. Treasury debt and is viewed as investors’ outlook for price pressures.

Gold futures for June delivery rose 0.7 percent to settle at $1,322.30 an ounce at 1:31 p.m. on the Comex in New York. That’s the biggest gain since April 11.

©2018 Bloomberg L.P.