(Bloomberg) — Gold was steady as a resurgence in US inflation reinforced bets the Federal Reserve will keep interest rates higher for longer.
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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 the Fed’s independence were a key factor propelling gold to record highs in January.
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 Iran 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.
The market is trying to decipher the likelihood of a potential end to hostilities in the Middle East and the Strait of Hormuz reopening fully, said Nicholas Frappell, global head of institutional markets at ABC Refinery. Gold gets a boost from a softer dollar and less aggressive policy tightening from central banks if the strait is going to re-open, he added.
Silver, meanwhile, has risen 19% in May. 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 $4,698.59 an ounce as of 1:54 p.m. in Singapore. Silver declined 0.4% to $87.1 an ounce. Platinum was little changed and palladium edged down. The Bloomberg Dollar Spot Index was flat.