Gold rates in India today surge to highest in 2 months, silver prices rise

The dollar index dropped 2% to a near two-month low, making gold less expensive for other currency holders. Benchmark U.S. 10-year Treasury yields slipped to a one-month low. The US consumer price index (CPI) rose 0.4% last month, less than the 0.6% estimates of economists polled by Reuters. Spot gold climbed 2.5% to $1,749.23 per ounce.

Gold is highly sensitive to U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. Silver advanced 2.7% to $21.56 per ounce.

Headline inflation came in at 7.7%, the lowest since January, before Russia’s war in Ukraine pushed up commodity prices. More important for the Fed, the core measure that excludes food and energy slowed more anticipated.

A softer US inflation print might be supportive for gold prices as lower inflation could prompt Fed to slow down its rate hike pace, say analysts. “Additionally, several Federal Reserve members are in favor of a smaller interest rate hikes. Investment demand was muted as indicated by SPR gold holdings that was unchanged yesterday after 2.9 tonnes of inflow on Tuesday. On the price action front $1687/ounce has now become the support,” Kotak Securities said in a note.

The less-than-expected inflation print also sparked a risk-on rally in equities. The tech-heavy Nasdaq 100 surged the most intraday since April 2020. The relief rally helped crypto markets stabilize despite the turmoil surrounding crypto exchange FTX. Big rate hikes by the Fed have been the main reason for Wall Street’s struggles this year.

Slower inflation could get the Federal Reserve to downshift the size of its rate hikes at its next policy meeting in December, after it pushed through four straight mega increases of 0.75 percentage points. Following Thursday’s inflation report, traders increasingly shifted into bets for the Fed to raise rates by only 0.50 percentage points next month, instead of a bigger hike. (With Agency Inputs)