Gold climbs after soft US inflation data; still set for weekly loss

Gold prices extended gains on Friday, supported by a softer dollar and Treasury yields after US economic data indicated a slowdown in inflation, although the Federal Reserve’s hawkish interest rate outlook kept bullion on track for a weekly loss.

Spot gold was up 1.2% at USD 2,624.15 per ounce, as of 01:41 p.m. ET (1841 GMT) and US gold futures settled 1.4% up at USD 2,645.10.

The dollar fell 0.6% from its two-year high, making gold less expensive for overseas buyers, while Treasury yields US10YT=RR edged down from an over six-month high.

The report showed that monthly inflation slowed in November after showing little improvement in recent months. The personal consumption expenditures (PCE) price index rose 0.1% last month after an unrevised 0.2% gain in October.

“Not only the PCE data, the personal income data, and the personal spending data all came out weaker than expected. We’re seeing people come back into the gold market here and re-establish positions,” Phillip Streible, chief market strategist at Blue Line Futures, said.

“Now all of a sudden going from two interest rate cuts which were priced in, that caused the dramatic selloff in gold, now comes back the possibility of three interest rate cuts in a more accommodative policy, but it’s still way too soon to tell.”

Bullion is down 0.9% this week so far after the Fed’s “dot plot” on Wednesday showed only two 25-bps rate cuts by 2025, signalling less easing than projected in September.

Higher interest rates increase the opportunity cost of holding gold, which does not yield any interest.

“With physical demand holding a floor for now, this means we are now heading into a 2025 that has relatively low Fed cut expectations, something that could fuel gold gains if inflationary fears end up being overblown, allowing the Fed more maneuverability,” J.P. Morgan said in a note.

Spot silver rose 1.8% to USD 29.54 per ounce, platinum gained 0.5% to USD 928.34 and palladium climbed 1.5% to USD 919.56.

(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Mohammed Safi Shamsi, Alan Barona, and Vijay Kishore)