Gold Gains on Weak Inflation data

Gold futures jumped on Thursday extending its rally for the fifth consecutive session. Weak inflation data and expectations of another round of quantitative easing by US Federal Reserve boosted the safe haven status of the precious metal.

Gold futures contract for August delivery gained $0.20 to settle at $1,619.60 per ounce on the Comex division of the New York Stock Exchange. The respective contract touched its intraday high of $1,629 per ounce.

The consumer price index fell 0.3 percent in the last month posting its first decline in last two year and biggest fall in CPI data since December 2008. Economists were expecting the decrease of 0.2 percent in consumer price index.

Brien Lundin from Gold Newsletter commented, “The perception of low price inflation, and even the possibility of deflation that this number hints at, gives the Fed tremendous breathing room for quantitative easing, a slowing economy gives the Fed a valid excuse for QE3. But a slowing economy combined with a sniff of deflation almost compels them to act,” he further added, “While the knee-jerk reaction to today’s CPI number was to sell gold, it actually sets the table for a very powerful rally in the metal, should this data prompt the Fed to launch QE3.”

The lower greenback also supported the commodities as the dollar index DXY which tracks the US dollar performance fell to 81.940 on Thursday as compared to 82.126 on Wednesday’s North American trading session.

Among other metals, silver futures for July delivery declined $0.53 or 1.9 percent to settle at $28.41 per ounce while copper futures for the same month gained 0.5 percent to $3.35 per pound.

Platinum futures contract for July delivery gained 1.4 percent or $20.80 to settle at $1,487.60 per ounce while palladium for September delivery climbed 1.9 percent or $11.60 to settle at $634.90 per ounce.


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