Gold prices dip in asia on profit taking, focus remains on Fed

Investing.com - Gold prices dropped in early Asia on Friday, taking profits on overnight gains with the continued focus on the timing of a widely expected rate hike by the Federal Reserve this year.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery fell 0.38% to $1,220.50 a troy ounce.

Silver for July delivery rose 0.25% to $17.508 an ounce. Copper for July delivery fell 0.09% to $2.918 a pound.

In Japan, the release of April CGPI showed a drop of 2.1% year-on-year, matching expectations and notching the first drop in 25 months since -0.5% in March 2013 as the base effect of the April 2014 sales tax hike fades.

Bank of Japan Governor Haruhiko Kuroda is due to speak on monetary policy at a seminar hosted by the Yomiuri Shimbun in Tokyo from 1240 to 1340 (0340 to 0440 GMT).

Late in the session, at 1400 (0500 GMT) the April consumer confidence survey is due. In March, the consumer-confidence index rose 0.8 points to a seasonally adjusted 41.7, marking the fourth consecutive rise and the highest since 41.7 in December 2013.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.04% to 93.44.

Overnight, gold futures rose slightly on Thursday reaching a three-month high, as soft U.S. inflation data sent the dollar plunging amid growing possibilities for a delayed interest-rate hike by the Federal Reserve.

The U.S. Bureau of Labor Statistics said Thursday that Producer Prices for total final demand in April fell 0.4%, significantly below estimates of a 0.1% -- the low end of analysts' forecasts.

On a year-over-year basis, Thursday's reading painted an even dire outlook as the index ticked down to a record low of minus 1.3%. In March, the index stood at negative 0.8% in comparison with the reading 12 months earlier.

A key reading of the Producer Price Index, the PPI-FD, which excludes food and energy prices, dipped 0.2% in April. Analysts expected the reading to remain flat on the low end of its forecasts. The PPI-FD is still up 0.8% on a year-over-year basis.

The moderate inflationary pressures, in combination with disappointing import and export data a day earlier will probably appease the doves on the Federal Open Market Committee (FOMC).

On Wednesday, the Labor Department said import prices slid 0.3% in April, following a 0.2% decline a month earlier. On a year-over-year basis, import prices have fallen by more than 10% after the 10th consecutive monthly decline.

Following the conclusion of its April meeting on April 29, the Fed reiterated that it would like to see inflation move toward its targeted goal of 2% before it raises interest rates for the first time since 2006.

Gold, which is not attached to interest rates or dividends, struggles to compete with high yield bearing assets in periods of rising rates.

Separately, the Labor Department said initial claims for state unemployment benefits fell by 1,000 last week to a seasonally adjusted 264,000 for the week ending on May 9. The four-week moving average, a more accurate gauge of labor market conditions, dropped by 7,750 to 271,750 – the lowest level in more than 15 years.