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Metals Stocks: Gold scores a modest gain as investors await U.S. inflation data for direction

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Gold futures ended higher on Wednesday, supported in part by a retreat in yields for benchmark Treasury yields, but prices held below $1,900 an ounce a day ahead of a U.S. inflation reading that could drive the precious metal’s next big move.

Gold has struggled to hold a close above $1,900 recently, and while 10-year U.S. Treasury yields have moved lower, “this hasn’t had the same bullish impetus for gold as it previously has,” David Russell, director of marketing at GoldCore, told MarketWatch. This may be due to the Federal Reserve “working hard to talk down inflation expectations and as a result, keeping real yields constrained.”

Still, all eyes will be on the inflation figures due to be released Thursday, he said.

The May reading of the U.S. consumer-price index is due on Thursday morning. The headline consumer price index is expected to rise by an outsized 0.5% in May and 4.8% for the year. A hotter-than-expected April CPI reading, which showed prices rose 4.2% year-over-year, briefly rattled markets last month.

Read: Inflation is still surging, CPI data will likely show. Any relief for consumers in sight?

“If a lower than expected figure is seen, then expect gold to sell off in the short term,” said Russell, while a higher than expected number “may very well give gold the fillip it needs to break resistance and start the next leg in this bullish cycle.”

August gold
GCQ21,
-0.03%

 
GC00,
-0.03%

 rose $1.10, or nearly 0.1%, to settle at $1,895.50 an ounce, following a 0.2% decline on Tuesday, which marked bullion’s first decline in three sessions.

July silver
SIN21,
+0.93%
,

SI00,
+0.93%
,
meanwhile, settled at $28 an ounce, up 27 cents, or 1%, most of its loss from Tuesday.

Wednesday’s trading for precious metals comes as the 10-year Treasury yield
TMUBMUSD10Y,
1.490%

hit its lowest level since around March. Meanwhile, the U.S. dollar steadied, after touching lows under a key level at 90, as gauged by the ICE U.S. Dollar Index
DXY,
+0.05%
.

Bullion has been particularly sensitive to moves in the U.S. dollar and a rise in government debt yields, which can undercut appetite for precious metals.

Also on Comex, July platinum
PLN21,
-1.02%

fell 0.9% to $1,151.80 an ounce and September palladium
PAU21,
-1.10%

settled at $2,772.80 an ounce, down 1.2%.

Prices for the July copper contract
HGN21,
-0.66%

lost nearly 0.6% to $4.53 a pound.

“Chinese inflation data showed difficulties to transfer high raw material costs to consumers,” said Anna Stablum, LME desk at Marex Spectron.

China’s May factory-gate prices climbed at their fastest annual pace in over 12 years because of soaring commodity prices, with its producer price index up 9% in May, according to Reuters.

China’s official consumer price index for May came in at 1.3% year over year, up from April’s reading of 0.9%, but below market expectation of 1.6%.

“In response to factory inflation soaring to 2008 highs, China vowed to control corn, wheat and pork prices,” said Stablum, in a market note. “Weak consumer demand in China is worrying investors as it might not only prompt action to lower raw material prices, but it might give an insight into how the rest of the world recovers from the pandemic.”

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