Gold edges up as US inflation continues to ease

Gold prices edged up last week as data showed US inflation was cooling, though not significantly enough for the Federal Reserve to slow the pace of its rate hikes. The afternoon fixing on Friday in London was $1,800.70 an ounce, compared with $1,792.55 a week earlier. Thai selling prices were quoted at 29,600 baht per baht-weight (15.2 grammes), unchanged from the previous week.

US consumer spending edged up 0.1% in November after climbing 0.4% in October. The Personal Consumption Expenditure index, the Fed’s favoured gauge of inflation, rose 5.5% year-on-year in November, down from 6.1% in October.

“With inflation close to being in line with expectations, gold prices were higher on fresh speculative buying ahead of the New Year on bets that the bigger funds might move to the long side of gold at the beginning of the year,” said Jim Wyckoff, senior analyst at Kitco Metals.

But revised data showing that US GDP in the third quarter rose more than previously estimated could keep the Fed on a firm path to fight inflation.

Gold prices are on track for a second consecutive yearly decline, falling nearly 2%.

However, “you’re going to see a better demand picture for the metals in 2023. Inflation could still be problematic, but central banks are going to, around mid-year, start to let off the gas and that’s going to be supportive for the metals markets”, said Wyckoff.

Markets also kept close tabs on fast-rising Covid-19 infections in top gold consumer China that could have an impact on physical buying.

Physical gold buyers in Japan took advantage of a dip in domestic prices following a surprise policy tweak by the central bank. The yen rose 4% against the dollar on Thursday, its largest one-day gain in 24 years.

In India, gold discounts widened to a six-month high as demand plunged. Local prices jumped to 55,220 rupees per 10 grammes last week, the highest since March 8.