Gold Climbs on Softer Inflation Data as Fed Rate Cut Hopes Rise

A recent shift in sentiment across financial markets has offered some relief to investors who have been grappling with inflation concerns. Gold prices climbed on Wednesday after softer-than-expected U.S. inflation data weakened the case for an immediate interest rate hike.

For many investors, the move comes as a breath of fresh air following weeks of uncertainty over when the Federal Reserve will take its next step.

Spot gold gained 0.5% to $3,337.49 per ounce by 09:09 ET (1309 GMT), after earlier rising as much as 1%. U.S. gold futures followed suit, rising 0.5% to $3,358.80. The catalyst? A surprise U.S. Consumer Price Index (CPI) cooling in May. The CPI rose a mere 0.1% last month, lower than expected, to show a 2.4% annual increase, slightly below April's 2.5% forecast.

Analysts quickly responded. "The unexpectedly soft core CPI print lifted the entire precious metals complex upward, with further help from lower Treasury yields and a weaker dollar," said independent metals trader Tai Wong.

The inflation figures have fanned expectations that the U.S. Federal Reserve might finally cut interest rates, perhaps as soon as next month. The market is now pricing in a 68% chance of a September rate cut, up from less than 50% earlier.

The latest developments in U.S.-China trade talks have led to positive investor sentiment. President Donald Trump announced a tentative deal with China over critical supplies, among them rare earth magnets. China is likely to deliver these items, and the U.S. will still let Chinese students attend its universities. While the day had yet to receive official confirmation from governments in both countries, the statement was read as an encouraging sign by global markets.

All eyes are now on the U.S. Producer Price Index (PPI), due on Thursday. The next meeting of the Federal Reserve is scheduled for June 17–18, and the PPI numbers will continue to shape perceptions of interest rate policy.

However, the overall sentiment for precious metals is still cautious. "The market wants gold and silver to penetrate key levels—$3,403 and $36.90, respectively—to trigger the continuation of a bullish trend," Wong said. "Failing to mount that in firm data could point toward a short-term pullback."

Spot silver fell 0.7% to $36.32 per ounce, while other precious metals were lower too. Platinum jumped 3.8 percent to $1,268.12, a three-year high, and palladium rose 1.1 percent to $1,072.25.