Gold futures moved higher on Tuesday, finding support as the U.S. dollar weakened after a report showing U.S. inflation rose in August at the slowest pace in seven months.
The consumer-price index climbed 0.3% in August, compared to a rise of 0.5% in July, the government said Tuesday. Economists polled by the Wall Street Journal estimated the cost of living, as measured by CPI, rose 0.4% in August.
The lower-than-expected consumer price index number has resulted in a weaker U.S. dollar, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. That supports dollar-denominated gold prices.
The data also eased expectations for an early taper by the Federal Reserve, said Karnani.
Against that backdrop, December gold
erased a double-digit point decline from early dealings to trade $11.50, or 0.6% higher, to reach $1,805.90 an ounce, following a 0.1% rise on Monday. December gold hit an intraday high on Tuesday at $1,810.60 an ounce.
In addition to CPI data itself, the Fed next week will likely use inputs, including the CPI report, to determine its plans for scaling back COVID-era bond purchases which have been in force to help provide liquidity to markets that were gummed up during the worst of the pandemic in the spring of 2020.
“The yellow metal will remain sensitive to US economic releases this week, especially today’s inflation reading, with any delay to tapering being a positive catalyst in the coming weeks,” wrote Craig Erlam, senior market analyst at Oanda Corp., in a research note.
Many members of the interest rate-setting Federal Open Market Committee, including Chairman Jerome Powell, have recently said that the central bank should announce tapering of its monthly purchases of $120 billion in Treasurys and mortgage-backed securities by the end of the year if the economy continues to recover from COVID.
was trading up by 0.3% at nearly $23.86 an ounce, reversing a sharp loss from earlier in the session, following a 0.4% decline on Monday. December copper
however, edged down by 1.2% to $4.32 a pound.
Palladium , meanwhile, saw the biggest move among the Comex metals, with prices down by nearly 5%, heading for a sixth straight decline and lowest finish since July 2020.
Both platinum and palladium are getting “hit hard yet again,” said Edward Meir, analyst at ED&F Man Capital Markets, in a Tuesday note. “The ongoing difficulties by automobile producers are surely weighing on both these complexes.”
The auto industry has taken a hit as a global shortage of computer chips leads to a slowdown in manufacturing, which in turn weakens demand for metals used to make cars, including palladium. The metal is mainly used in catalytic converters in gasoline-powered vehicles to help control emissions.
The most-active October platinum contract
lost $20, or 2%, to $937.50 an ounce.