WASHINGTON (dpa-AFX) - Prices of the yellow metal declined amidst a fresh set of PCE data from the U.S. that revealed sticky inflation, raising concerns about the Fed's likely actions to combat the price pressures.
The latest data update from the U.S. on Wednesday morning showed annual PCE Price Index steady at 3.7 percent and the core component thereof steady at 3.3 percent. The month-on-month PCE price index increased to 0.2 percent from -0.1 percent in June while the core component thereof increased to 0.2 percent from 0.1 percent in June. With the Fed's preferred inflation gauge revealing inflation above the Fed's 2-percent target, sentiment towards gold remains weak.
The CME FedWatch tool that tracks the expectations of interest rate traders shows the likelihood of interest rates rising above the current level of 3.5-3.75 percent increasing to 40.1 percent in the FOMC in September. It was 39.6 percent a day earlier and 33.1 percent a week earlier.
With renewed inflation worries and Fed hike bets boosting the U.S. dollar, the Dollar Index has surged ahead. The Dollar Index which measures the strength of the dollar against a basket of six currencies has rallied 0.24 percent overnight to 99.15.
The slump in gold prices, driven by expectations of an increase in interest rates is attributed to the opportunity loss of holding the yellow metal, which is typically non-interest bearing in nature.
Gold Futures for December settlement is currently trading at $4,675.86, shedding 0.40 percent from the previous close of $4,694.50. While the day's trading ranged between $4,653.94 and $4,730.90, the 52-week trading ranged between $3,410.70 and $5,626.80. Gold Futures had touched an all-time high of $5,626.80 on January 29.
Despite the recent losses, gold futures are holding on to weekly gains of 2.9 percent and monthly gains of close to 15 percent. Year-to-date gains are at 6.7 percent. The yellow metal's price gain over the 3-year horizon however stands at more than 143 percent.
Spot Gold is currently trading 0.8 percent lower on an overnight basis at $4,621.88 per troy ounce. While the day's trading ranged between $4,598.34 and $4,673.83, the 52-week trading ranged between $3,373.76 and $5,595.46. Spot Gold had touched an all-time high of $5,595.46 on January 29.
At current prices, Gold Futures and Spot Gold have both gained more than 36 percent over the past year.
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