The CPI Data Suggests a Downward Trend in Inflation, Leading to a Surge in Gold Futures

Published on: May 16, 2024
Author: Amy Liu

US government data indicates a slowdown in the inflation rate, triggering expectations of interest rate cuts returning this year. On Wednesday (May 15th, local time), gold futures touched their highest level in over three weeks, reaching $2,390 per ounce during the trading session.

In April, the Consumer Price Index (CPI) rose by 0.3%, below the predicted increase of 0.4%. The core inflation rate, excluding food and energy, increased by 0.3%, the smallest increase in four months.

Joy Yang, Head of Product Management and Marketing at MarketVector Indexes, stated during an interview that these data confirm a declining trend in inflation, raising optimism for the Federal Reserve to resume interest rate cuts later this year. The US dollar is weakening, likely attracting American investors to reinvest in gold.

The June gold futures contract on the New York Commodity Exchange (Comex) rose by $31.20, a 1.3% increase to $2391.10 per ounce. Trading prices briefly reached as high as $2,392.60, the highest intraday level for the most active contract since April 22nd.

Yang mentioned, “Despite the downward trend in inflation, stickiness has been persistent. The Federal Reserve is closely monitoring the US, balancing between reviewing data and the upcoming US elections. As other countries around the world attempt to reduce their reliance on the US dollar and central banks continue hoarding gold, gold prices benefit. Despite the earlier strength of the US dollar, it is still allowing gold prices to rise. Meanwhile, gold-related stocks like gold miners, which had previously decoupled from gold prices, are regaining leverage with the rise in gold prices.”

The MVIS Global Junior Gold Miners Index GDXJ, tracking the performance of the most liquid small-cap companies in the global gold and silver mining industry, has increased by 15% year-to-date and showed significant gains at the overnight close. The most active gold futures hit an all-time high on April 19, reaching $2,413.80 per ounce.

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