Gold logs largest 1-day price gain in nearly a month
Fall in CPI may make Fed hesitate to raise interest rates
Gold futures logged their largest single-session price gain in nearly a month on Wednesday, after a U.S. consumer-price report suggested that inflation might be short of the Federal Reserve’s target levels to support a rate hike.
Gold for December delivery GCZ5, +0.06% added $16.40, or 1.5%, to settle at $1,119 an ounce on Comex. The price move marked gold’s highest settlement in just over a week, after failing to score a session point or percentage gain this high since Aug. 20., when gold soared 2.2%, gaining $25.30, on dovish Fed minutes and a the beginning of a stock rout spurred by unease about China’s sluggish economy.
“Price action in gold is ultra-sensitive…as everyone in the market is looking to, and positioning ahead of the Fed” decision, said Tyler Richey, co-editor for The 7:00’s Report. “That was clear when the light CPI number hit this morning” and spurred short covering.
The Fed has been keenly watching employment and inflation as two key gauges to help influence its plans for kicking off the first interest-rate hike in nearly a decade.
Data Wednesday showed that the price of consumer goods fell in August for the first time since the beginning of the year, down by a seasonally adjusted 0.1%.
With the tick down in inflation, the central bank may hesitate to implement tighter monetary policy if it isn’t confident inflation is headed to its target 2% level.
The Federal Open Market Committee concludes its closely watched two-day meeting Thursday with a policy statement and news conference, which could see the central bank provide clues to the pace of interest-rate hikes—a move that has broad implications for a host of assets including dollar-denominated gold.
Against that backdrop, the U.S. dollar index DXY, +0.01% traded lower Wednesday, supporting a move higher in dollar-denominated gold.
‘As long as the Fed does not hike rates…a short-term continuation higher [for gold] is in play.’
“Of course, gold’s future price action will depend on what the FOMC opts to do…but as long as the Fed does not hike rates (likely, in our view), a short-term continuation higher is in play,” said Matt Weller, senior market analyst at Forex.com.
In other metals, December silver SIZ5, -0.03% jumped 55.9 cents, or 3.9%, to $14.885 an ounce and December copper HGZ5, +0.24% added 2.6 cents, or 1.1%, to $2.452 a pound. October platinum PLV5, -0.28% rose $17.50, or 1.8%, to $975.70 an ounce, while December palladium PAZ5, -0.51% ended at $611.95 an ounce, up $11.50, or 1.9%.
Source: MarketWatch – Gold logs largest 1-day price gain in nearly a month
