Gold up as inflation lowers ahead of Fed meeting

Gold prices surged over 1% on Wednesday, with spot gold trading around $2,338 as softer U.S. inflation data fueled expectations of an interest rate cut by the Federal Reserve later this year, while silver jumped 3.2%.

Spot gold prices climbed by over 1% on Wednesday due to weaker-than-expected US inflation, which strengthened calls for a rate cut by the Federal Reserve this year. Market participants are waiting for the central bank policy statement and forecasts for the economy that will be given later in the day. 

Physical gold went up by 1% and was trading at around $2,338. To $59 per ounce by 1311 GMT and US gold futures increased by 1%. 2% to $2,335. 50. Silver soared 3. 2% to $30. 19 per ounce.

Although there was no change in the May’s U.  S.  consumer price index on a monthly basis, the market was expecting a 0. 1% rise. The core CPI also increased at a lower than par 0. 2%. 

The low inflation data strengthened beliefs that it might begin reducing interest rates in the third quarter. It suggests that the chance of a 25 basis point cut in September has increased from 54% before the release of the CPI report to 70%. 

“With inflation seeming to have reached its highest level, traders have raised their bets that the Fed will cut interest rates later in the year, a positive for gold with no earnings,” Phillip Streible, chief market strategist at Blueline Futures in Chicago. 

It is believed that the Fed will not make any changes to interest rates now that it is meeting this week. However, investors will pay extra attention to the statement and the economic projections to ascertain the future of the monetary policy. 

Gold has gained more than 11 percent year to date due to the fact that expectations for rate cuts are still high, geopolitical tensions helping to solidify its value as a safe haven, and strong demand for physical gold especially from central banks particularly China. They skyrocketed to $2,449, the highest level it has ever recorded. 89 on May 20. 

Nevertheless, most of the analysts has kept long-term bullish stance on bullion because of this possible recession and easier monetary policy by the Fed; however, some have pointed out that move towards $3,000/oz may not be that viable at this juncture. 

Other precious metals also made their gains, specifically, platinum was up by 2%. 2% to $972. 60 while palladium added 4. 8% to $926. 25, due to the support supplied factors. 

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The U.  S.  dollar index fell by 0. fell to 7% after the inflation data, which increased the demand for commodities that are priced in the greenback as well.