By Joe Hoppe

Gold futures rose as markets took note of cooler U.S. inflation data ahead of a Federal Reserve policy decision.

August gold futures on the New York Mercantile Exchange recently rose 1.3% to $2,355.3 a troy ounce, making gains after failing to break out of a range of $2,327.2 to $2,334.5 earlier in the session. They currently trade at the highest price since Friday's stronger-than-expected U.S. nonfarm payroll data dashed hopes for an interest rate cut any time soon, sparking a sell-off.

Interest rates are typically inversely related to gold prices, with higher rates damping the appeal of non-interest bearing bullion.

The Consumer Price Index rose 3.3% annually in May, data showed Wednesday, below April's 3.4% and slightly weaker than the 3.4% consensus forecast in a Wall Street Journal poll of analysts. Core prices, which exclude volatile food and energy items, climbed 3.4% on year.

Softer inflation will buoy gold prices by improving the chances of a U.S. rate cut, said Bas Kooijman, CEO and asset manager of investment manager DHF Capital.

Later on Wednesday is the Fed decision. Analysts widely expect it will choose to keep interest rates within the 5.25%-5.5% target range first introduced last July, given inflation has proven stickier than expected over the first quarter of the year.

"[Our] U.S. rates strategy team expect the Fed to not only keep rates unchanged, but also to use nearly identical messaging to its last meeting," said RBC Capital Markets analysts in a note.

After Wednesday, there will only be four meetings left this year, and many economists think the market would be lucky to receive just one or two rate cuts in 2024, said Genesis Gold Group CEO Jonathan Rose.

While U.S. inflation has moderated, price pressures remain high, especially in the services sector, said Henk Potts, market strategist at Barclays Private Bank. Barclays expects the Fed to cut rates by just a quarter point this year.

That said, even with stagnant interest rates, gold futures have risen nearly 14% in the year to date, outperforming most other assets from major banks and institutions this year as issues like increasing national debt remain persistent, said Jonathan Rose.

"We expect factors such as political and economic instability in the United States will have a massive impact on the value of gold moving forward," Rose said. With many forecasts for gold exceeding the $3,000-$5,000 an ounce mark over the next decade, Genesis Gold remains highly optimistic about the precious metal, Rose added.

Write to Joe Hoppe at

(END) Dow Jones Newswires

06-12-24 1011ET