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PRECIOUS-Gold rebounds in 'roller coaster' trade as economic fears grow

reuters.com · 06/10/2022 10:02
PRECIOUS-Gold rebounds in 'roller coaster' trade as economic fears grow

U.S. CPI up 1% in May

U.S. consumer sentiment hit record low in early June-survey

Gold claws back up despite dollar rally

Recasts, adds comments, updates prices

By Kavya Guduru and Arpan Varghese

- Gold prices bounced back in volatile trading on Friday, as focus turned to economic risks following an initial retreat in bullion after elevated U.S. inflation readings bolstered bets for aggressive interest rate hikes.

Spot gold XAU= rose 0.8% to $1,861.39 per ounce by 11:27 a.m. EDT (1527 GMT).

U.S. gold futures GCv1 advanced 0.7% to $1,864.60.

U.S. consumer prices accelerated in May, suggesting the Federal Reserve could continue with its 50 basis points rate hikes through September, sending gold to its lowest since May 19 at $1,824.63 nL1N2XW25Z

But the safe-haven asset soon erased those losses as investors assessed the economic repercussions, with bullion getting a further fillip after the University of Michigan's survey showed U.S. consumer sentiment plunged to a record low in early June amid soaring gasoline prices. nL1N2XX1DL

"Gold has had a manic roller coaster ride, dropping to lows of the month before rallying sharply on the CPI report and bouncing back again on the worst consumer sentiment report on record," said Tai Wong, an independent metals trader in New York.

High interest rates usually dim bullion's appeal since they translate to an increased opportunity cost of holding the asset, which pays no interest. nL1N2XW1FY

Gold's fate next week may hinge on the Fed meeting, Wong added.

Gold's rebound also came despite strength in the dollar, .DXY and elevated U.S. Treasury yields. USD/US/

Gold prices have been "remarkably resilient given (rate) hiking expectations, and a softening physical market" on concerns that inflation may outpace rate hikes, said Standard Chartered analyst Suki Cooper.

Physical gold discounts in India this week hit seven-week highs, while COVID-19 curbs dissuaded buyers in China. GOL/AS nL4N2XX1OS

Silver XAG= too latched on to gold's coat tails, erasing initial declines to gain 0.7% to $21.82 an ounce. Platinum was flat at $971.01.

But palladium XPD= shed 0.7% to $1,911.01, bound for a weekly decline.

(Reporting by Kavya Guduru and Arpan Varghese in Bengaluru; Editing by Emelia Sithole-Matarise)