Gold Rises After Softer-Than-Expected CPI Data

By Amrith Ramkumar and David Hodari

Gold prices climbed Thursday with the dollar sliding after data showed U.S. consumer prices rose less than expected in April, though on an annual basis, inflation showed signs of firming.

Front-month gold for May delivery rose 0.7% to $1,320.80 a troy ounce on the Comex division of the New York Mercantile Exchange to snap a three-session losing streak. Prices have stayed between about $1,305 and $1,360 this year, moving within that range based on safe-haven demand, swings in the dollar and worries about higher interest rates.

The dollar rallying to its highest levels of the year has hurt gold recently by making the dollar-denominated commodity more expensive for overseas buyers. But on Thursday, the WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, declined 0.5%.

Treasury yields also fell after the soft consumer-price index data, a positive for gold because some analysts have worried that a faster pace of interest-rate increases by the Federal Reserve will buoy bond yields and make gold less attractive.

The Labor Department said the CPI, which measures what Americans pay for everything from salad dressing to eye care, rose 0.2% in April. Excluding the volatile food and energy categories, so-called core prices rose 0.1%. Both figures were weaker than economists expected, though in the 12 months ended in April, overall prices rose 2.5% and core prices were up 2.1%.

The data should ease some worries the Fed might pick up the pace of interest-rate increases, as the rise in inflation and rates still seems gradual, said Maxwell Gold, director of investment strategy at ETF Securities.

Data released Wednesday showed U.S. producer prices edged only slightly higher in April, another possible sign inflation pressures in the economy remain relatively modest.

"Concerns around the Fed still tightening are abating a little bit," Mr. Gold said.

He added that he was encouraged the overall trend of inflation is increasing and keeping up with interest rates, a positive for gold because some investors use the metal to hedge against a pickup in consumer prices.

Among base metals, front-month copper for May delivery climbed 1.7% to $3.0925 a pound, also climbing for the first time this week. Prices have fallen 5.7% this year, hurt by worries of an economic slowdown in China, the world's largest consumer, and steady supplies. Still, some analysts expect prices to move higher as economic data picks up and if mining labor contract renegotiations disrupt supply.

Write to Amrith Ramkumar at [email protected] and David Hodari at [email protected]