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Gold falls as U.S. inflation rates beat expectations

Published 04/15/2014, 02:06 PM
Updated 04/15/2014, 02:07 PM
Gold plunges on U.S. inflation data, Fed policy expectations

Investing.com - Gold prices plunged on Tuesday after U.S. inflation data beat forecasts, while sentiments that recent expectations for U.S. monetary policy to stay loose for some time to come may have been overblown added to the selloff.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at $1,300.80 a troy ounce during U.S. trading, down 2.01%, up from a session low of $1,289.60 and off a high of $1,328.50.

The June contract settled up 0.64% at $1,327.50 on Monday.

Futures were likely to find support at $1,278.10 a troy ounce, the low from April 1, and resistance at $1,331.30, Monday's high.

The Labor Department reported earlier that the U.S. consumer price index rose 0.2% in March, exceeding expectations for a 0.1% gain, after a 0.1% uptick the previous month.

The on-year rate rose 1.5% in March, beating estimates for a 1.4% gain, and while still below the Fed's 2% target, the numbers fueled a selloff in the gold market.

The core consumer price index, which excludes volatile food and energy items, rose 0.2% last month, beating estimates for a 0.1% increase, after a 0.1% gain in February.

The on-year core consumer prices index rose 1,7%, beating estimates for the index to remain unchanged at 1.6%.

Elsewhere, a separate report showed that the Empire State manufacturing index fell to 1.3 for April from 5.6 in March, defying expectations for a rise to 8.2.

Investors viewed Tuesday's data as solid enough to keep the Federal Reserve dismantling its monthly asset-purchasing program, which currently stands at $55 billion.

Monthly bond purchases by the Fed weaken the dollar by suppressing borrowing costs, sending investors to stocks in hopes in investing and hiring follow, which bolsters gold's appeal as a hedge.

Exacerbating the selloff were sentiments that the market overreacted to the dovish minutes from the Fed's March policy meeting released recently.

In the minutes, the Fed scrapped a 6.5% trigger at which it was previously set to hike interest rates, though after digesting the report, markets concluded policy won't remain ultra-loose for too long, which fueled Tuesday's selloff.

Meanwhile, silver for May delivery was down 2.51% at US$19.508 a troy ounce, while copper futures for May delivery were down 1.90% at US$2.990 a pound.

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