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Gold Prices Rise while Bond Yields Fall after 'Cooler-than-Expected' US Inflation Data

GOLD PRICES rose after key US inflation data stayed in line with expectations, while the US dollar and US bond yields fell as bets the Federal Reserve will pause its rate in September cemented, writes Atsuko Whitehouse at BullionVault.   
On Thursday, the Bureau of Labor Statistics reported that the annual headline US Consumer Price Index (CPI) for the month of July was 3.2%. This was slightly below the 3.3% forecast. July did see an increase from June’s 3% and the first acceleration in the headline figure since June 2022.
Core CPI, a measure which strips out the volatile food and energy sectors, was 4.7%, lower than June's 4.8%.
12-month % change, CPI, selected categories, not seasonally adjusted Source: US Bureau of Labor Statistics
Gold priced in the US dollar jumped $10 per ounce after the US inflation data was released and settled to around $1924.  The yellow metal hit a one-month low of $1914 in early Thursday trading after falling three sessions in a row.  
Ten-year US Treasury yields – a benchmark rate for government as well as many finance and commercial borrowing – edged lower down below 4.0%.
The Dollar index – a measure of the US currency's value versus its major peers – fell 0.4%, after trading in a tight range all this week.
Betting that the Federal Reserve will hold its key interest rate in September 2023 grew to 90% from 85% before the release of the US CPI data, according to the CME derivatives exchange's FedWatch tool.
“Considering the recent rally in energy prices, we think a higher-than-expected inflation number tonight will be more dimly frowned upon, and the market will be more likely to overlook a ‘good’ number,” said an analyst ahead of the inflation data. 
European natural gas prices extended the biggest one-day gains since March 2022 last session, holding above €40, as the potential for disrupted global liquefied natural gas supply due to the possibility of workers striking in Australia.   
Oil prices also rose on Thursday, climbing to multi-month peaks as the market weighed supply tightness concerns as tensions between Russia and Ukraine in the Black Sea region could threaten shipments of Russian oil, on top of extended production cuts by Saudi Arabia. 
Moscow in July 2023 ended an arrangement that gave Ukraine’s food cargo safe passage in the Black Sea. Ukraine responded by using sea-drones to attack a Russian oil tanker and a warship at its Novorossiysk naval base which has added more risk for transport in the Black Sea.
Brent crude hit its highest since January 2023 during early trading on Thursday, while West Texas Intermediate crude (WTI) gained to a level last seen in November 2022.
Ahead of the release of today’s key inflation data, the New York Federal Reserve Bank said on Tuesday that Americans borrowed more than ever on their credit cards in the last quarter, with balances surpassing $1 trillion for the first time even as overall household debt loads were largely unchanged.
"Despite the many headwinds American consumers have faced over the last year - higher interest rates, post-pandemic inflationary pressures, and the recent banking failures - there is little evidence of widespread financial distress for consumers," New York Fed researchers wrote in a blog accompanying the data release.
The price of silver which finds nearly 60% of its annual demand from industrial uses, spiked and then dropped before settling at $22.79 per ounce after Thursday’s key US data was published.  The grey metal hit a one-month low early on Thursday as concerns about weakening demand in China in light of a series of weaker-than-expected economic data this week.  
The latest China’s trade data this week fuelled concerns over growth prospects for the world’s second-largest economy as exports declined by 14.5% year on year in dollar terms, the steepest fall since the outset of the coronavirus pandemic in February 2020. Imports tumbled 12.4%, the biggest decline since January 2023 and one of the worst in recent years.
China also reported on Wednesday that CPI fell by 0.3% in July from a year ago, its first annual decline in more than two years, while the Producer Price Index (PPI) also extended its fall to 4.4%, as lacklustre demand weighed on the economy.
Platinum, which finds two-thirds of its demand from industrial uses, led by auto-catalysts, rose to $901 per ounce after breaching the psychological line of $900 earlier.
The price of palladium – of which Russia is the No.1 miner – also rose to $1269 per ounce from one-month lows.
European stocks were higher on Thursday as the pan-European Stoxx 600 index was up 0.5% by mid-afternoon and S&P 500 contracts advanced 0.6%, looking set to bounce back from another negative session on Wednesday.

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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