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Gold gains in Asia after Japan core CPI better than seen, Yellen awaited

Published 05/26/2016, 08:07 PM
Updated 05/26/2016, 08:09 PM
© Reuters.  Gold gains in Asia after Japan CPI

© Reuters. Gold gains in Asia after Japan CPI

Investing.com - Gold prices rose in Asia on Friday as consumer prices in Japan came in a bit better than expected on the core measure and investors look ahead to Fed Chair Janet Yellen for direction on U.S. interest rates.

On the Comex division of the New York Mercantile Exchange, gold for June delivery rose 0.15% to $1,222.25 a troy ounce.

Silver futures for July delivery gained 0.17% to $16.370 a troy ounce. Copper futures for July delivery rose 0.24% to $2.102 a pound.

Earlier in Japan, national CPI for April fell 0.3%, in line with the 0.3% drop seen year-on-year, while national core CPI also dropped 0.3%, below the expected 0.4% decline year-on-year.

Consumer prices remain under pressure from lower goods prices as food companies and restaurant chains were cautious about raising prices at the start of fiscal 2016 in April.

Service costs, which account for a little over half of the CPI basket showed a slight pickup, with a tighter labor supply supporting prices for housekeeping and medical services. Overall a slower pace of wage hikes in fiscal 2016 is clouding the prospect for the Bank of Japan guiding inflation to 2% from zero in the medium term. It is still uncertain whether the recent pickup in crude oil prices will continue amid slow global growth.

Overnight, gold closed virtually flat on Thursday, amid strong U.S. economic data and a slightly lower dollar, as investors await a highly-anticipated appearance from Federal Reserve chair Janet Yellen for further signals on whether the U.S. central bank could raise interest rates at a closely-watched meeting next month.

On Thursday morning, the U.S. Labor Department said initial jobless claims fell by 10,000 for the week ended on May 20 to 268,000, slightly below analysts' expectations of 275,000. At the same time, the four-week average ticked up by 3,000 to 278,500, reflecting three previous weeks of considerable gains. The rising four-week average could provide an ominous harbinger for the labor market heading into next week's critical May jobs' report, the last before the Federal Open Market Committee meets on June 14-June 15.

Yellen will make her first public appearance in nearly two months at a ceremony when she receives the Radcliffe Medal from Harvard University's Radcliffe Institute for Advanced Study on Friday afternoon. Yellen could provide further hints on the pace of the Fed's long-term rate path in a Question-And-Answer session with Harvard economics professor Gregory Mankiw after the presentation. Over the last two months, Yellen has reiterated that the Fed will raise rates gradually in the current cycle, amid widespread volatility in global financial markets and persistently low inflation.

Two other Federal Open Market Committee (FOMC) policymakers, St. Louis Fed president James Bullard and Fed governor Jerome Powell, sent indications on Thursday that the Fed could raise rates shortly. The FOMC has left its benchmark Fed Funds Rate at a targeted range between 0.25 and 0.50% in each of its three meetings this year since its historic rate hike last December.

Any rate hikes by the Fed this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.

Elsewhere, durable goods orders surged 3.4% last month following upwardly revised figures in March, outperforming expectations of gains of 0.8%. Vehicle orders surged on the month, providing a boost to the headline reading as the aircraft component soared by 65%. Following the release, the Federal Bank of Atlanta said its GDP Now model sees the U.S. economy growing at a rate of 2.9% in the second quarter.

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