Gold prices trimmed losses on Thursday after weaker-than-expected U.S. producer inflation data raised hopes for two rate cuts in 2024, even as the Federal Reserve’s projections called for just one cut this year.
Spot gold was down 0.5% at $2,310.89 per ounce, as of 1510 GMT. Prices fell as low as $2303.84 before the data came out. U.S. gold futures were down 1.2% to $2,326.90.
U.S. producer prices unexpectedly fell in May amid lower energy costs, indicating that inflation subsided after surging in the first quarter.
“The marketplace thinks that there’s probably going to be more than one cut this year, and that’s why you’re not seeing stronger selling pressure in the gold market, and more importantly, that’s why we’re seeing bond yields drop today,” said Jim Wyckoff, senior analyst at Kitco Metals.
Benchmark U.S. 10-year Treasury yields dropped to their weakest levels since April 1, making non-yielding bullion relatively more attractive. Money market pricing showed traders raised their bets to price in about 50 basis points of Fed policy easing (bps), or two-quarter-percentage cuts by the end of this year, from 40 bps before the PPI data. The Fed held rates steady on Wednesday and projected only one rate cut in 2024 despite some progress in inflation, as growth and unemployment lodged at levels better than the U.S. central bank considers sustainable in the long run. A slowdown in inflation was also noted in Wednesday’s consumer price index data, which was surprisingly flat in May. That sent gold as high as 1% before it pared gains to close just about 0.3% higher after the Fed’s hawkish presser the same day.
Elsewhere, spot silver fell 2.4% to $29.00 per ounce, platinum was down 1.6% at $948.45 and palladium lost 2.5% to $883.52.