Gold holds decline as rising US inflation raises rate-hike bets

Gold held a decline as a resurgence in US inflation reinforced bets that the Federal Reserve will keep interest rates higher for longer.

Bullion was trading near $4 700 an ounce, after dropping 0.6% on Wednesday on data showing US wholesale inflation accelerated in April to the fastest pace since 2022. Treasury 10-year yields rose toward the highest since July. That’s negative for gold as it pays no interest.

The US Senate on Wednesday narrowly confirmed Kevin Warsh as chair of the Fed, with concerns looming over whether he’ll maintain the central bank’s tradition of making interest-rate decisions free from political pressure. Questions around Fed independence was one of the key factors propelling gold to record highs in January.

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Adding pressure, the US consumer price index rose 3.8% from a year ago, the most since 2023, data out Tuesday showed. Gasoline prices are up some 50% since the war began, according to data from the American Automobile Association, and the latest Bureau of Labor Statistics report pointed to rising prices for airfares, housing, clothing, and food.

Gold has traded in a tight range since falling sharply in the early days of the Iran war, as investors oscillate between inflation risks that could keep rates higher and growth concerns that could prompt easing as the conflict drags on. Silver, meanwhile, has risen 19% in May.

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The gains are largely a result of technical breakthrough and speculation, Nicky Shiels, head of research and metals strategy at trader MKS PAMP SA said in a note. Copper’s recent rally and supply concerns have helped to propel the surge of silver, which is a byproduct of copper mining, she added. Silver, zinc, and copper are showing strong trend signals, “with positioning mechanically increasing without needing fresh momentum.”

Spot gold was 0.2% higher at $4 700.39 an ounce as of 7:24 a.m. in Singapore. Silver added 0.3% to $87.81 an ounce. Platinum was little changed and palladium edged higher. The Bloomberg Dollar Spot Index was 0.1% lower.

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