Gold futures held below $1,900 an ounce on Wednesday, a day ahead of a U.S. inflation reading that could drive the precious metal’s next big move, but losses were modest as prices found some support from a retreat in yields for benchmark 10-year Treasury bonds.
Gold struggled to move back towards the key $1,900 level, “though that could merely be an abundance of caution” ahead of Thursday’s U.S. consumer price index numbers, said Michael Hewson, chief market analyst at CMC Markets UK, in a market update.
A strong number would potentially give “both the U.S. dollar, as well as yields, a big uplift,” he said. That could dull investment interest in gold.
The May reading of the U.S. consumer-price index is due on Thursday morning. A hotter-than-expected April CPI reading, which showed prices rose 4.2% year-over-year, briefly rattled markets last month.
Gold has struggled to consistently hold above a price at $1,900 an ounce, a level viewed as resistance for the precious metal in recent trading.
Wednesday’s trading for precious metals comes as the 10-year Treasury yield TMUBMUSD10Y, 1.499% hit its lowest level since around March. Meanwhile, the U.S. dollar steadied, after touching lows under a key level at 90, as gauged by the ICE U.S. Dollar Index DXY, +0.03%.
Bullion has been particularly sensitive to moves in the U.S. dollar and a rise in government debt yields, which can undercut appetite for precious metals.
Prices for the July copper contract HGN21, -0.60% lost 0.6% to $4.53 a pound.
“Chinese inflation data showed difficulties to transfer high raw material costs to consumers,” said Anna Stablum, LME desk at Marex Spectron.
China’s May factory-gate prices climbed at their fastest annual pace in over 12 years because of soaring commodity prices, with its producer price index up 9% in May, according to Reuters.
China’s official consumer price index for May came in at 1.3% year over year, up from April’s reading of 0.9%, but below market expectation of 1.6%.
“In response to factory inflation soaring to 2008 highs, China vowed to control corn, wheat and pork prices,” said Stablum, in a market note. “Weak consumer demand in China is worrying investors as it might not only prompt action to lower raw material prices, but it might give an insight into how the rest of the world recovers from the pandemic.”