Gold futures turned higher Tuesday after data showed U.S. consumer prices in March rose for the fourth month in a row and the pace of inflation hit the highest level in 2½ years. Bullion is often viewed as a hedge against inflation.
June gold GC00, +0.55% GCM21, +0.55% rose $ 7.10, or 0.4%, at $ 1,739.70 an ounce, after the precious metal logged the lowest finish for a most-active contract since April 5, FactSet data show.
The consumer-price index jumped 0.6% in March, the government said Tuesday, spearheaded by the rising cost of oil. Economists polled by Dow Jones and The Wall Street Journal had forecast a 0.5% increase in the CPI. The 12-month rate of inflation rose to 2.6% in March from 1.7%.
“Inflation will probably pick up further and the numbers for the next few months may appear abnormally large as base effects from the 2020 lockdowns skew the data,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, referring to distortions in monthly inflation figure that results from abnormally high or low levels in the year-ago period.
“The Fed expects inflation to then settle down after a temporary acceleration. However, the key risk is if their assumption turns out to be wrong, and price pressures remain elevated. In fact, with consumers’ inflation expectations rising, this is could translate to actual rise in price levels,” he said.
The move for gold on the session thus far also comes as bond yields, which compete against gold for haven demand, were little changed after the inflation data.
The 10-year Treasury note TMUBMUSD10Y, 1.668% was down 0.5 basis point at around 1.67% after CPI. Rising bond yields make gold less compelling to investors because precious metals don’t offer a coupon.
Meanwhile, May silver SIK21, +2.10% SI00, +2.10% shed added 35 cents, or 1.4%, to $ 25.22 an ounce, following a 1.8% decline a day ago.