Gold hits near 2-week high after United States data disappoints

Gladys Abbott
July 17, 2017

The unchanged reading followed a drop of 0.1 percent in May, the Labor Department said Friday. Inflation has climbed just 1.6 percent from a year ago.

Excluding the volatile food and energy categories, prices rose 0.1 percent in June and 1.7 percent from a year earlier.

"Inflation has surprised on the downside for a few months now, so further confirmation of that is putting the pressure on the Fed to basically not raise interest rates this year".

The US data bolstered expectations that the US Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs.

Fed policymakers have lifted their benchmark short-term rate four times in the past 18 months. It is also benefiting from United States dollar weakness as signs the Federal Reserve will pursue only a gradual rate tightening path weigh on the greenback after Senate testimony from Federal Reserve chair Janet Yellen. That caused a rally in the stock markets as investors celebrated the prospect of lower interest rates for longer.

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The next key risk will be domestic inflation for next week, he said.

Fed Chair Janet Yellen's comments to the US Congress this week "were more dovish than originally anticipated", said David Meger, director of metals trading for High Ridge Futures in Chicago.

Headline inflation fell 0.1% in June (because of falling energy costs), while the core measure of inflation (which excludes the volatile food and energy costs) rose 0.1% in June.

India's trade deficit narrowed more than expected to $12.96 billion in June as gold imports almost halved from a month earlier, government data showed. The government records additional goods or services for the same price as the equivalent of a drop in price.

China is expected to report on Monday that its economy grew 6.8 per cent in April-June from a year earlier, cooling from the previous quarter's robust 6.9 per cent pace.

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