Gold steady in Asia with traders digesting cooling US Inflation

Gold was steady in Asia as investors digested the impact of cooler inflation in the US on the Federal Reserve’s monetary tightening path.

Bullion initially jumped on August 10 after the US consumer price index decelerated by more than expected in July, suggesting the Fed could be less aggressive in raising interest rates, but ended up 0.1 per cent lower.

Some traders pared bets on tightening, with a half-point rate increase being re-established as the likeliest outcome next month, as opposed to another three-quarter point hike.

Still, two Fed officials responded to the softening inflation by saying it doesn’t change the US central bank’s path toward even higher interest rates. Minneapolis Fed President Neel Kashkari said on August 10 that he wants the benchmark rate at 3.9 per by the end of this year and at 4.4 per cent by the end of 2023, adding that it wasn’t realistic to conclude the Fed will start cutting early next year.

His counterpart in Chicago, Charles Evans, said inflation remains “unacceptably high” and that he expects “that we will be increasing rates the rest of this year and into next year to make sure inflation gets back to our 2 per cent objective.”

Spot gold declined 0.1 per cent to $1,790.25 an ounce as of 8:40 am in Singapore. Prices rose as much as 0.8 per cent to $1,807.93 on August 10, the highest level since July 5.

The Bloomberg Dollar Spot Index was flat after dropping 1 per cent in the previous session. Silver and palladium were little changed, while platinum edged higher.