Gold Lower After US Inflation Boosts USD

Gold pared gains on Friday, heading for a second weekly drop, after data showing U.S. consumer prices rose in March tempered speculation the Federal Reserve will delay its first interest rate rise in nearly a decade.

The metal held above the $1,200 an ounce level, however, which it broke above earlier this week after a run of downbeat U.S. data led analysts to reassess expectations the Fed would raise rates in June.

Spot gold was up 0.4 percent at $1,201.31 an ounce at 1339 GMT, off an earlier high of $1,207.60 and down 0.5 percent on the week. U.S. gold futures for June delivery were up $3.50 an ounce at $1,201.50.

Gold is sensitive to U.S. monetary policy, as rising rates would boost the dollar, in which the metal is priced, while lifting the opportunity cost of holding non-yielding bullion.

“Even if the rate rise gets pushed back, people still see rates rising, and we believe that’s still a negative for gold,” Julius Baer commodity analyst Warren Kreyzig said. “Maybe there’s less sensitivity around the timing than there is about the actual direction (of rates).”

“The delay may give gold a reprieve, but in the long term we think it will still go down.”

The dollar pared early losses against a basket of currencies to turn positive after the U.S. inflation data.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza