Investing.com -- Gold futures plummeted more than 1% on Friday to a five-year low, as optimistic U.S. inflation data bolstered hawkish arguments for an interest rate hike by the Federal Reserve later this year.
On the Comex division of the New York Mercantile Exchange, gold for August delivery plunged more than $14 an ounce to an intraday low of $1,129.80 before inching back up to 1,132.80 at the close to finish down 0.98% on the session. The precious metal fell to multi-year lows, dropping under November's nine-month low of 1,132.90. A major technical breakdown typically occurs when gold dips below $1,130, according to commodities analysts.
Gold futures closed lower for the fifth straight day and for the seventh time in the last eight sessions. Since peaking above $1,300 an ounce in late-January, the precious metal has fallen approximately 12%.
On Friday morning, the U.S. Department of Labor's Bureau of Labor Statistics said its Consumer Price Index (CPI) rose by 0.3% in June on a monthly basis, in line with consensus estimates. On a year-over-year basis, the CPI gained 0.1% above analysts' forecasts for a flat reading.
A reading of Core CPI, which strips out food and energy prices, provided even more optimism for the hawks at the Fed in favor of an imminent rate hike. The core reading, which the Fed believes provides a more accurate gauge of inflation, rose 0.2% from May and 1.8% over the last 12 months. Analysts expected gains of 0.1% and 1.7% respectively.
More critically, energy prices rose by 1.7% on the month on the back of a 3.4% increase in gasoline prices. Over the last few weeks, the Fed has strongly hinted that it could raise rates if it received indications that temporary drags from lower energy prices subsided. It has been nearly a decade since the U.S. Central Bank has hiked its benchmark Federal Funds Rate.
Gold, which is not attached to dividends or interest rates, struggles to compete with high-yield bearing assets in periods of rising interest rates.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged to a six-week high of 98.04 before falling slightly back to 97.98.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for September delivery fell 0.112 or 0.75% to 14.868 an ounce.
Copper for September delivery dipped 0.027 or 1.08% to 2.496 a pound.