· Gold shook off headwinds from a stronger dollar to scale a near two-week peak on Thursday as data pointed to easing inflationary pressure in the United States, boosting expectations of a further interest rate cut by the Federal Reserve.
· Spot gold gained 0.6% to $1,287.80 per ounce, having hit a high of $1,288.87 earlier, its highest since May 17.
· The metal reversed course from earlier in the session, when it fell to its lowest level since May 23 at $1,274.44.
· U.S. gold futures settled up $6.10 at $1,292.40.
· While data showed strong growth in gross domestic product in the first quarter, a gauge of inflation tracked by the Federal Reserve increased at a 1.0% rate last quarter, instead of the previously reported 1.3% pace. Manufacturing, retail sales, housing and exports also dropped in April.
· Fed policymakers are likely to shrug off the last quarter’s growth spurt and focus on the weak domestic demand and inflation when they meet next month.
· “The core PCE came in weaker than expected and is helping gold on the margin since it reaffirms this market’s belief that the next move from the Fed is a cut, which tends to lower the opportunity cost for holding non-cash flow yielding assets like gold,” said Daniel Ghali, commodity strategist at TD Securities.
· Gold also shrugged off initial pressure from a stronger dollar, with the U.S. unit hovering within striking distance of a two-year high against a basket of major currencies.
· “Gold has held up a lot better than expected with the recent strength in the dollar and that’s a major feather in the cap of the gold market in the near term,” said John Caruso, senior market strategist at RJO Futures.
· The dollar has been used as the preferred hedge against trade tensions, repeating a trend seen last year.
· “Short-term resistances (for gold) to watch include $1,280, $1,285 and $1,293, levels which were previously support. We would only turn bullish again on gold should it rise back above that $1,300 hurdle and stay above it, or print a bullish reversal at lower levels first,” Fawad Razaqzada, market analyst with Forex.com, wrote in a note.
· Meanwhile, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.5% to 740.86 tonnes on Wednesday.
Reference: CNBC
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