Gold Futures Pare Early Gains, Settle Lower For 3rd Straight Day

Despite a weak dollar, gold futures settled lower on Tuesday, extending losses to a third straight session, as data showing a smaller than expected rise in consumer prices prompted investors to seek riskier assets such as equities.

The consumer inflation data added to optimism about the Federal Reserve pausing its recent interest rate increases when the central bank announces its monetary policy decision on Wednesday.

The dollar index dropped to 103.05 after the release of the U.S. consumer price inflation data, and despite recovering to 103.31, remains in negative territory, losing about 0.33%.

Gold futures for August ended lower by $11.10 or about 0.6% at $1,958.60 an ounce, coming off the session’s high of 1,985.90 an ounce.

Silver futures for July ended down $0.237 at $23.822 an ounce, after having surged to $24.520 an ounce earlier in the session.

Copper futures for July settled at $3.8310 per pound, gaining $0.0790.

Data from the Labor Department showed the consumer price index inched up by 0.1% in May after climbing by 0.4% in April. Economists had expected prices to tick up by 0.2%.

Excluding food and energy prices, core consumer prices rose by 0.4% in May, matching the increase seen in each of the two previous months as well as economist estimates.

The Labor Department also said the annual rate of consumer price growth slowed to 4% in May from 4.9% in April. Economists had expected the pace of growth to slow to 4.1%. The year-over-year growth in May marked the smallest annual increase since the period ending March 2021.

The annual rate of core consumer price growth also slowed to 5.3% in May from 5.5% in April, in line with expectations.

Following the release of the report, CME Group’s FedWatch Tool is indicating a 91.9% chance the Fed leaves interest rates unchanged.

“Wall Street is becoming a little bit hopeful here that an FOMC June skip could eventually become a July pause,” said Edward Moya, senior market analyst at OANDA. “Inflation is mostly heading lower and some of the leading indicators (car wholesale prices, weakening consumer) support the argument that the disinflation process will continue.”

“Even if the end of tightening is widely expected, gold may struggle if stocks continue rise,” Moya added.

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