Gold at six-week high after US data dampen rate hike expectations

NEW YORK/LONDON — Gold prices rose to a six-week high on Friday after weaker than expected US inflation dampened expectations that the US Federal Reserve will aggressively raise interest rates and North Korea fired a ballistic missile, triggering safe-haven buying.

Data on US second quarter gross domestic product and labor costs also pushed the dollar lower, making bullion cheaper for holders of other currencies.

“It showed a big fall in annual inflation rates across the board… so there is no urgency for the Fed to raise interest rates,” said Commerzbank analyst Carsten Fritsch.

Gold is sensitive to rising rates because they push up bond yields, making non-yielding gold less attractive, and tend to boost the dollar.

Spot gold was up 0.80% at $1,268.84 an ounce by 1:50 p.m. EDT (1750 GMT), after touching $1,270.38, the highest since June 14. It was on track to rise for a third week in a row.

US gold futures for August delivery settled up 0.70% at $1,268.40.

North Korea fired a missile on Friday in an unusual late-night test launch, and details announced by Japanese officials and media suggested it could be an intercontinental ballistic missile.

“There has to be at least a modest factor here that risk is rising in North Korea. We’re not off to the races, we’re not above $1,300 yet, but certainly there is room for speculators to increase their position,” said Rob Haworth, senior investment strategist at US Bank Wealth Management. “It doesn’t hurt that you’ve got a weak US dollar, and real rates have fallen off a little bit. Interest rates are under pressure, inflation’s in question.”

The US dollar index fell on a combination of underwhelming US economic data and political uncertainty, while global stock markets were also weak.

Julius Baer analyst Carsten Menke said the rally was fragile since it was accompanied by physical market selling and he expected prices to fall to $1,200 an ounce.

In other precious metals, silver was up 1% at $16.69 an ounce, on track for a third weekly gain. Platinum was 1.20% higher at $933.60 an ounce but set for its first weekly decline in three. Palladium was up 0.70% at $878.72, and was on track for its strongest weekly performance in seven weeks. —