Gold futures settled higher on Wednesday, although the dollar’s recovery from lower levels limited the yellow metal’s upside.
Dovish Fed talk and China stimulus hopes contributed to gold’s uptick. A drop in Treasury yields helped as well.
Media reports suggest that China is considering raising its budget deficit for 2023 to help the economy meet the government’s annual growth target.
The dollar index, which dropped to 105.56 around mid morning, recovered to 105.90 later on in the session, recording a marginal gain.
Gold futures for December ended higher by $12.00 at $1,887.30 an ounce.
Silver futures for December ended up $0.180 at $22.133 an ounce, while Copper futures for December settled lower by $0.0220 at $3.6120 per pound.
“Falling global bond yields continue to fuel gold’s price rally. Gold is seeing inflows on both uncertainty over how much market turmoil will stem from the Israel-Hamas war and as the Fed tries to cool the economy,” says Edward Moya, Senior Market Analyst at OANDA. “If Wall Street becomes convinced that rates have peaked and the chances of more tightening in 2024 are unlikely, gold could rally back above the $1920 level,” he adds.
Data from the Labor Department showed producer prices in the U.S. increased by slightly more than expected in the month of September. The data said its producer price index for final demand climbed by 0.5% in September after advancing by 0.7% in August. Economists had expected prices to rise by 0.4%.
The producer price growth was partly due to a continued surge in energy prices, which spiked by 3.3% in September after skyrocketing by 10.3% in August.
The report also said the annual rate of producer price growth accelerated to 2.2% in September from a revised 2% in August. Economists had expected the pace of price growth to come in unchanged compared to the 1.6% originally reported for the previous month.
On Thursday, the Labor Department is scheduled to release its more closely watched report on consumer price inflation in the month of September.
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