Gold surges above $2,400 mark as US Inflation data boosts rate-cut expectations; silver up 2.7%

Gold prices surged over 1 per cent on Thursday, surpassing the $2,400 per ounce mark, following data revealing a surprise decline in U.S. consumer prices last month. This development heightened expectations for interest rate cuts by the Federal Reserve.

Spot gold climbed 1.5 per cent to $2,406.99 per ounce by 05:56 a.m. ET (1256 GMT), marking its highest level since May 22. Meanwhile, U.S. gold futures rose 1.4 per cent to $2,412.60.

“Gold continues to trade positive, supported by weakness in the US Dollar and a dip in treasury yields after the Fed chairman’s comments on inflation and interest rates. However, prices are stuck in a range so far in the session amid caution ahead of the CPI data for clarity of Fed’s easing trajectory,” said Pranav Mer, VP – Research (Commodity & Currency) BlinkX and JM Financial.

What’s weighing on gold prices?

U.S. consumer prices unexpectedly fell, marking the smallest annual increase in a year. This bolstered views that the disinflation trend was back on track, bringing the Fed closer to cutting interest rates.

Interest-rate futures reflected about an 85 per cent chance of a rate cut at the Fed’s September meeting, up from roughly 70 per cent before the data release.

Non-yielding bullion tends to become more appealing when interest rates decline.

Following the U.S. inflation data, the dollar dropped to a more than one-month low, making gold more attractive to holders of other currencies, while the benchmark U.S. 10-year Treasury yield fell to a four-month low.

Over two days of commentary before the Senate and House committees, Fed Chair Jerome Powell indicated that the Fed was moving closer to deciding on a rate cut.

Meanwhile, spot silver surged 2.7 per cent to $31.63 per ounce, reaching its highest level since May 31. Platinum increased by 1.9 per cent to $1,008.35, while palladium advanced 1.6 per cent to $1,002.54.