Gold prices rose over 1%, hovering near the $1,900 per ounce pivot on Thursday after data showing signs of cooling inflation in the United States boosted bets for slower rate hikes from the Federal Reserve.
U.S. consumer prices grew 6.5% on an annual basis in December, in line with expectations, after a 7.1% rise last month. Core inflation was in line with expectations as well.
Spot gold jumped 1.1% to $1,896.30 per ounce by 2:40 p.m. ET (1940 GMT). It earlier hit $1,901.4, its highest since May.
U.S. gold futures settled up 1.1% at $1,898.8.
“Real yields easing and the dollar softening have buoyed gold, as the two key headwinds for gold through 2022 are showing signs of subsiding,” said Standard Chartered analyst Suki Cooper, adding the Fed could hike by 25 bps in February before pausing and then cutting in the second half of 2023.
The dollar dropped 0.8% to its lowest since early June, making gold more attractive for other currency holders.
Members of the Fed were quick to highlight that while the CPI numbers were moving in the right direction, they stood by their stance to bring levels back to 2%. They see rates rising “slower but longer and potentially higher.”
Philadelphia Federal Reserve Bank President Patrick Harker and St. Louis Fed President James Bullard see rates landing north of 5% to tame inflation, which peaked to 9.1% in June 2022.
Investors are pricing in a roughly 90% chance for a 25 basis point hike to a range of 4.50% to 4.75% at the next Fed meeting.
“The 50-day moving average has crossed the 200-day moving average; the favorable technicals – a golden cross – imply upside risk in the near term although prices are also closing in on overbought territory,” Cooper highlighted.
Spot silver jumped 1.8% to $23.85 per ounce, platinum gained 0.4% to $1,075.25, while palladium was up 0.4% to $1,780.46.