On Wednesday, in a seesaw trading session on global commodity market, the safe-haven yellow metal gold futures dropped nearly 1 per cent, snapping out a five-session-long streak of gains in a row, as a 12-year-peak US Consumer Prices Index (CPI) in April had heightened up the fears of a longer-term inflation amid a strong build up in underlying price pressures, leading to a robust rally in American currency while sharply depreciating appetites for riskier assets.
In point of fact, in the day’s mass-scale downward spiral in gold futures prices was entirely catalysed by a US Labour Department data which had shown that US Consumer Prices Index rose by 0.8 per cent in April, the strongest level since June 2009, ramping up frets that the US Fed might eventually intervene to wrestle against what several analysts were contemplating as a longer-term inflation hike.
On top of that, massive Government stimulus spurring up domestic demands amid a chronic labour shortage and supply restrain, bolstering an underlying price pressure, had fanned up the flames further. Adding further strains, US Fed Vice-President Richard Clarida was quoted saying following reveal of US CPI data that it might not be the proper time yet to taper off the Central Bank’s economic support on the economy, though had warned that the Federal Reserve would not hesitate to use fiscal tools to put the kibosh on persistently rising inflation indicators.
Gold falls as US Dollar claws back from nearly three-month lows
Citing statistics, in the day’s commodity market wind down, spot gold futures tumbled nearly 0.9 per cent to $1,822.91 an ounce, while US gold futures had gobbled down 0.7 per cent in losses to wrap up the session at $1,822.80.
Besides, the US Dollar, which has been contemplating as a hedge against an inflation hike, surged against most major and emerging market currencies with US Dollar Index (DXY) measured against a basket of six major currencies on an average jumped as much as 0.66 per cent to 90.75.
Apart from that, US 10-year Treasury bond Yields soared to a two-week high of 1.69 per cent following release of April CPI data. Among other precious metals, palladium futures dipped 2.4 per cent to $2,867.06 an ounce despite a growing disturbance in supply chains, while silver contracts curbed 1.6 per cent to $27.17 an ounce.
Meanwhile, addressing to an earlier-than-anticipated brouhaha in inflation indicators, a senior market strategist at RJO Futures, Bob Haberkorn said, “People trading gold and silver are a little concerned that maybe this inflation is getting a little too quick, and the Fed did say they have tools to tamp it down.
... Traders are concerned about what those tools may be. For this week, you’re going to see caution in the gold and silver markets. ”