Gold climbs as US CPI data spurs Fed slowdown bets

Dec 13 (Reuters) – Gold rose over 1% on Tuesday to its highest in more than five months after a smaller-than-expected rise in US consumer prices buoyed bets for a slowdown in rate hikes from the Federal Reserve.

Spot gold climbed 1.7% to USD 1,810.98 per ounce by 1:44 p.m. ET (1844 GMT), after hitting its highest since June 30 earlier in the session.

US gold futures settled 1.9% higher at USD 1,825.50.

Gold prices are up significantly on the outlook that rate hikes may be slowing, said Bob Haberkorn, senior market strategist at RJO Futures.

The inflation print “signals to the market that the interest rate hikes that the Fed’s been doing are working and they might not need to be as aggressive this week or in the coming months,” Haberkorn added.

U.S consumer prices barely rose in November amid a drop in the cost of gasoline and used cars, leading to the smallest annual increase in inflation in nearly a year.

Following the data, the dollar dropped over 1% to a nearly six-month low, making gold less expensive for other currency holders. Benchmark US Treasury 10-year note yields US10YT=RR also slipped.

Fed funds futures prices now imply a better-than-ever chance that the Fed will follow its expected half-point interest rate hike this week with a smaller 25-basis-point rate hike in February.

“If the Fed abandons its hawkish tone completely, gold could have a path towards the USD 1,861 level,” Edward Moya, senior analyst with OANDA, said in a note.

The US central bank’s policy statement is due at 2 p.m. EST (1900 GMT) on Wednesday.

Lower rates tend to be beneficial for bullion as they decrease the opportunity cost of holding the non-yielding asset.

Spot silver rose 1.9% to USD 23.76 per ounce, platinum jumped 3.4% to USD 1,035.63 and palladium gained 2.4% to USD 1,931.76.

(Reporting by Kavya Guduru and additional reporting by Rahul Paswan in Bengaluru; Editing by Sherry Jacob-Phillips and Shinjini Ganguli)