Update: Gold Falls to the Lowest in More than Six Months as U.S. Inflation Rose Again in May
(Updates prices.)Gold traded at the lowest in more than six months early on Tuesday as the metal falls out of favor with traders, who are moving to the dollar as a hedge as a report showed U.S. inflation rose again last month, heightening expectations the Federal Reserve will raise interest rates to check rising prices.Gold for July delivery was last seen down US$155.80 per ounce to 4,1130.80 per ounce, the lowest since Nov.24.The drop comes as the U.S. Bureau of Labor Statistics reported the May Consumer Price Index (CPI) rose at a 4.2% annualized rate, up from 3.8% in April but matching expectations, according to Marketwatch. Core CPI, excluding volatile food and energy, rose 2.9% annualized, up from 2.8% a month earlier and again matching consensus expectations.The rise in costs has come on higher energy prices as the U.S. war on Iran blocked the Strait of Hormuz, keeping much of the 20% of daily oil exports supplied by Persian Gulf nations off the market. The bureau said rising oil prices accounted for over 60% of the monthly rise in costs.High inflation is raising worries the Federal Reserve will need to boost interest rates to slow demand, bearish for gold since it pays no interest. The CME FedWatch Tool currently expects the central bank's policy committee will leave rates unchanged when it meets next week but the probability of rate hike in September is rising."A slump in precious metals gathered momentum on Tuesday ... as rising US inflation concerns and growing expectations of Federal Reserve rate hikes continued to pressure sentiment. The move is forcing investors with long-held bullish positions to reassess the outlook, particularly as higher inflation and tighter monetary policy create a less supportive environment for non-yielding assets," Saxo Bank wrote.Still, the dollar edged higher, with the ICE dollar index last seen up 0.03 points to 99.94. Treasury yields rose, with the U.S. two-year note last seen paying 4.143%, up 0.8 basis points, while the yield on the 10-year note was up 3.5 points to 4.557%.
