Gold climbs as cooling US inflation bolsters Fed rate cut bets

Gold climbed to a near one-month high on Wednesday, aided by a weaker dollar and lower Treasury yields after data showed US consumer prices rose less than expected in April, boosting chances of the Federal Reserve cutting interest rates.

Spot gold climbed over 1% at USD 2,386.63 per ounce by 1816 GMT. US gold futures for June delivery settled 1.5% higher at 2394.90 per ounce.

The consumer price index data “could be an early indication that over time inflation will cool and the Fed will make its first interest rate cut,” said Phillip Streible, chief market strategist at Blue Line Futures.

US CPI rose 0.3% last month after advancing 0.4% in March and February, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut.

Economists polled by Reuters had forecast the CPI rising 0.4% on the month and advancing 3.4% year-on-year.

The dollar fell 0.6% against a basket of other major currencies to hit its lowest in over a month, making gold more attractive for other currency holders. Benchmark 10-year Treasury yields hit a more than one-month low.

Technically, the gold futures bulls have the firm overall near-term technical advantage. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at USD 2,400.00, wrote Jim Wyckoff, senior analyst at Kitco Metals in a note.

Traders are now pricing in about a 74% chance of a US rate cut in September, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding gold.

Spot silver jumped 3.6% to USD 29.61 per ounce, palladium gained 3% to USD 1,007.19 and platinum climbed over 3% to USD 1,062.20, hitting a near one-year high.

(Reporting by Rahul Paswan and Daksh Grover in Bengaluru; Editing by Bernadette Baum, Kirsten Donovan, and Alan Barona)