Gold continues with $2,000 ‘mini peaks’ in quest for record high

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By Barani Krishnan — Gold reinforced its hold on $2,000 territory on Wednesday by reaching for another peak not seen in almost three years as softer U.S. consumer prices bolstered bets for a rate hike pause that could help the yellow metal’s quest for a record high.

Gold for June delivery on New York’s Comex settled at $2,024.90 an ounce, up $5.90, or 0.3%, on the day. In the previous session, June gold rose by almost 2%. Wednesday’s session peak itself was $2,043.45 — a level not seen since August 2020.

The spot price of gold, more closely followed than futures by some traders, got to above $2,028 during the session.

The Dollar Index fell 0.6% on the day, boosting gold, oil and most other commodities after data showed U.S. consumer prices cooled for the year to March, growing about one percent below February levels, even as core prices minus food and energy remained stubbornly higher.

The Consumer Price Index, or CPI, grew at an annual rate of 5% last month versus a forecast 5.2% and against February’s 6%. For the month itself, March CPI was up 0.1% versus a forecast 0.2% and against February’s 0.4%.

But core CPI, which strips out food and energy prices, expanded as forecast by an annual 5.6% versus February’s 5.5%. For the month, core CPI grew by a slower 0.4% for March as forecast, versus 0.5% for February.

While that indicated mixed results for the central bank’s fight against inflation, it also boosted hopes that the Fed might be closer to a rate hike pause.

The Fed has raised rates by 475 basis points over the past 13 months, taking them to a peak of 5% from just 0.25% after the COVID-19 outbreak in March 2020.

While it is still early to anticipate what the Fed will do at its next rate decision in May, some economists are pricing in another hike of 25 basis points based on the relatively steady jobs growth for March, which came in less than 100,000 below February’s level. Others, influenced by the latest CPI data, think the Fed might actually call for a pause.

“We don’t keep raising interest rates till we get to 2%,” San Francisco Fed President Mary Daly said, referring to the central bank’s target versus actual inflation at 5%. “We don’t keep raising interest rates with blinders on. Policy tightening has reached a point where we do not expect rates to be raised at every meeting.”

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