Investing.com -- 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.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery rose 6.10 or 0.50% to 1,224.30 a troy ounce. Earlier, gold spiked to 1,227.70 in U.S. morning trading, its highest level since mid-February, before falling back after investors locked into profits.
Gold likely gained support at 1,210, its level at the close on April 29 and was met with resistance at 1,236.70, the high on Feb. 17. Gold is up roughly 3.5% since opening the month at 1,183.70.
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 Apr. 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.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, continued on a downward path, falling to a three-month low at 93.18, before slightly rebounding in U.S. afternoon trading. The index reached as high as 100.27 in mid-April.
EUR/USD, meanwhile, moved above 1.14 for the first-time since late-January, as the spread between U.S. 10-Year Treasuries and German 10-Year bunds continued to narrow.
Dollar-denominated commodities such as gold become less expensive for foreign purchasers when the dollar weakens.
Silver for July delivery jumped 0.217 or 1.26% to 17.438 an ounce, one day after surging by more than 4%.
Copper for July delivery fell 0.006 or 0.19% to 2.923 a pound.