Gold Firms Ahead of U.S. CPI Data

gold bars

Gold prices barely changed on Wednesday as investors wait for the release of the U.S. consumer price index (CPI) report. But the key indicators remain supportive of the yellow metal. Both the U.S. dollar and Treasury yields have not recovered, which boosts the demand for the bullion.

Spot gold is currently trading at $1,891.53 per ounce as of 0736 GMT.

Stephen Innes of SPI Asset Management is looking forward to the policy meeting of the Federal Open Market Committee next week. He said the market expects a dovish taper from the Feds, which would be positive for the bullion. Fitch Solutions analysts predicted further price increases in the coming months. They emphasized the resurgence of COVID-19 infections in many countries, the weak U.S. dollar, and the declining U.S. government bond yields.

The U.S. CPI report will be released tomorrow. It will give traders and investors clues on whether or not the Federal Reserve would begin tapering its support for the economy.

The European Central Bank (ECB) will hold its policy meeting on the same day. Experts had different predictions. Credit Suisse economists expect the ECB to cut monthly bond purchases under the Pandemic Emergency Purchase Program to €60 billion. But Morgan Stanley experts believe the central bank will maintain the current level of bond buying. They explained that the European Union is still less than halfway to its COVID-19 vaccination target. Also, the recovery fund money has yet to be disbursed. Others are hoping that the ECB would make an upward adjustment to its inflation forecast for 2021.

Meanwhile, the U.S. Labor Department reported that job openings increased by 998,000 to reach a record high of 9.3 million in April. However, hiring was little changed indicating supply constraints.

In South Korea, the unemployment rate rose 3.8% in May after dropping to an eight-month low in April. Despite this, the number of employed continued to increase at a fast pace.

In China, factory gate prices in May rose at the fastest annual rate in more than 12 years. The producer price index increased by 9.0% year over year, beating experts’ forecast of 8.5%.

In politics, President Joe Biden called off the talks with the Republicans on his infrastructure plan. Senator Shelley Capito, leader of the Republican senators handling the negotiations, offered only $330 billion in infrastructure spending. It is way short of Biden’s reduced proposal of $1,7 trillion.