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Gold Trading at a Seven-Month Low on a Higher Dollar After U.S. Wholesale Prices Rose More Than Expected in May

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Gold fell to a seven-month low early on Thursday, dropping for a fifth-straight session as U.S. wholesale price inflation rose more than expected last month, boosting the dollar.

Gold for July delivery was last seen down US$48.30 to US$4,085.00, the lowest since Nov.18.

The U.S. Bureau of Labor Statistics on Thursday reported the Producer Price Index (PPI) rose by 1.1% in May, down from 1.4% annualized in April but ahead of expectations for a rise of 0.7%, according to MarketWatch. Core PPI, excluding volatile foods, energy, and trade services, rose 0.8% monthly, down form 1% in April but again ahead of expectations for a rise of 0.5%.

The report follows the Wednesday release of the U.S. Consumer Price Index that rose at a 4.2% annualized rate in May, up from 3.8% a month earlier. The rise in oil prices that has followed the U.S. war on Iran keeps inflation hot and pushes traders to the dollar as a hedge against the threat central banks will need to hike interest rates to slow rising prices.

Gold's "decline gathered further pace on Wednesday following the strong US inflation print and renewed gains in oil prices after fresh attacks in the Middle East", Saxo Bank noted.

The dollar rose following the PPI report, with the ICE dollar index last seen up 0.11 points to 100.05. Treasury yields were lower, with the US. two-year note last seen paying 4.15%, down 0.8 basis points, while the yield on the 10-year note was down 2.6 points to 4.533%.

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