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Gold prices traded higher Wednesday morning after data showed U.S. wholesale prices eased in May, providing another sign that inflation pressures are abating in the face of the Federal Reserve’s monetary tightening campaign.
Investors also looked ahead to the central bank’s interest-rate decision and Chair Jerome Powell’s press conference slated for Wednesday afternoon.
Price Action
-
Gold prices for August delivery
GC00,
+0.57% GCQ23,
+0.57%
rose $11.90, or 0.6%, to $1,970.50 per ounce on Comex. -
Silver for July delivery
SI00,
+1.17% SIN23,
+1.17%
gained 25 cents, or 1%, to $24.07 per ounce. -
Palladium for September delivery
PAU23,
+2.27%
advanced $35.40, or 2.6%, to $1,394 per ounce, while July platinum
PLN23,
-0.19%
rose 40 cents, or less than 0.1%, to $982.10 per ounce. -
Copper for July delivery
HGN23,
+0.64%
was up 2 cents, or 0.4%, to $3.85 per pound.
What’s happening
Data released Wednesday morning showed U.S. annual wholesale prices increased by only 1.1% for the 12 months ended in May from 2.3% in the prior month, the Labor Department reported Wednesday. That’s the lowest reading since December 2020.
For the month, U.S. wholesale prices fell 0.3% in May — the third drop in the past four months. Economists polled by the Wall Street Journal had forecast a 0.1% decline in the producer price index.
Stripping out volatile food and energy prices, the data showed that core inflation was flat last month and in line with expectations.
The May PPI report came just hours before the Federal Reserve is scheduled to announce its latest interest-rate decision. Market participants see a 92% probability that the Fed will leave its policy rate unchanged at a range of 5% to 5.25%, according to CME FedWatch Tool.
Tuesday’s CPI report shows consumer price inflation last month hit a two-year low of 4%.
However, the inflation data doesn’t mean the Fed can’t resume interest rate increases in July if needed. The market-implied likelihood of the central bank delivering a hike in July has remained above 50% since last week.
“While Powell may side with the doves, getting the hawks to accept a ‘hold’ and not dissent may require ‘hawkish’ concessions, including leaving the window open to another hike in July and dispelling the prospect of a rate cut in 2023,” said Thierry Wizman, global FX and interest rates strategist at Macquarie.
“The Statement will reflect that, of course, by maintaining the current bias in the language (‘In determining the extent to which additional policy firming may be appropriate…’). The dots may also reflect some hawkishness,” he wrote in emailed commentary Wednesday.
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