Gold prices edge lower as US inflation eases

Gold prices edge lower as US inflation eases

In Asia, the Bloomberg gold edged lower as investors digested the impact of cooler inflation in the US on the Federal Reserve monetary tightening path.

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Bullion jumped on Wednesday after the US consumer price index decelerated more than expected in July, suggesting that the Fed could be less aggressive in raising interest rates - but ended up 0.1% 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.

Two Fed officials responded to the softening inflation by saying it doesn't change the path of the US central bank toward higher interest rates. Minneapolis Fed President Neel Kashkari said Wednesday he wanted the benchmark rate to be at 3.9% by the end of the year and at 4.4% by the end of 2023 and that it wasn't realistic to conclude that the Fed will start cutting early next year.

Inflation remains unacceptably high and he expects to increase rates the rest of the year and into next year to make sure inflation gets back to our 2% target, according to his counterpart in Chicago, Charles Evans. Despite the improvement, inflation is still well above the target level of the Fed and one reading may not be enough to change their tightening stance, said Madhavi Mehta, senior analyst at Kotak Securities Ltd. Easing inflation pressure also reduces demand for gold. Spot gold declined by 0.3% to $1,786. 26 an ounce was as of 12: 26 p.m. in Singapore. The price went up as much as 0.8% to $1,807. The highest level since July 5 was 93 on Wednesday. The Bloomberg Dollar Spot Index went up 0.1% after dropping 1% in the previous session. Silver and palladium fell, while platinum went up.

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