WASHINGTON (dpa-AFX) - Gaining ground from the losses incurred in yesterday's session, gold prices have advanced on Wednesday despite the ongoing U.S.-Iran standoff pushing oil prices higher, as expectations of Chinese intervention to end the gulf war increase.
Front Month Comex Gold for June month delivery has climbed by $21.80 (or 0.47%) to $4,708.50 per troy ounce.
Front Month Comex Silver for June month delivery has catapulted by $4.089 (or 4.79%) to $89.380 per troy ounce.
The U.S. Bureau of Labor Statistics data today revealed that producer prices soared 1.4% month-over-month in April, well above forecasts of 0.5%.
Core producer prices (excluding food and energy) jumped by 1% in April, well above market forecasts of an increase of 0.3%. Year-over-year, core producer price inflation accelerated to 5.2% in April, exceeding market expectations of 4.3%.
The Producer Prices Index, increased to 156.50 in April from 154.37 in March. Year-over-year growth by the index accelerated to 6.0% in April from an upwardly revised 4.3% in March, exceeding market expectations of 4.9%.
The S&P Global Composite Purchasing Managers' Index increased to 177.70 on May 8 from 171.10 of the previous week.
Yesterday's data showed that consumer prices increased by 0.6% month-over-month in April, in line with market expectations, following a 0.9% jump in March.
These numbers have reinforced expectations that the Federal Reserve will keep interest rates unchanged through this year.
The war between U.S.-Israeli forces and Iran entered day number 75 today, though under a fragile ceasefire. The Strait of Hormuz remains closed, pushing oil prices to the upside.
After rejecting the response from Iran to a U.S. proposal to end the conflict, U.S. President Donald Trump claimed Iran has been 'playing games' with the U.S. for nearly 47 years and remarked that he did not even finish reading the documents fully. Trump observed that the ceasefire is now 'life support.'
In addition, yesterday CNN reported that Trump is frustrated with Iran's behavior and was seriously planning to restart the military operations in Iran.
Contrary to market expectations, not even a short-term solution to the crisis has emerged so far.
Both nations are disagreeing on each other's peace proposal and intensifying verbal rhetoric.
Iran's Islamic Revolutionary Guards Corp has redrawn the Strait of Hormuz map.
Iran's Fars news agency said Deputy Political Director of the IRGC Navy Mohammad Akbarzadeh has provided a new map, with Iran claiming an area 10 times larger than the present size to assert its control.
Trump is on a two-day visit to China, where he will meet President Xi Jinping to discuss various bilateral issues, including the gulf crisis.
Prior to his departure, Trump stated that the U.S. would not be needing China's help to end the war. He also asserted that the U.S. would finish the conflict, either through diplomatic methods or 'otherwise.'
Expectations are running high among market participants that an intervention by China or its mediation could reopen the Strait of Hormuz, which has remained effectively blocked since the start of war. China and Iran share longstanding trade ties, with the former importing 90% of the latter's oil exports.
Global economies are feeling squeezed by the inflationary pressure due to the surge in oil prices.
India, the world's second-largest consumer of gold (next to China) which relies on imports to meet its domestic demand, hiked import duties on gold and silver to 15% from 6% to ease pressure on foreign exchange due to West Asia crisis.
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