Gold increases as declining US inflation supports Fed rate reduction wagers

By 1449 GMT, spot gold had increased by 0.5% to $2,369.49 an ounce. June delivery U.S. gold futures increased 0.6% to $2,374.60 per ounce.

By 1449 GMT, spot gold had increased by 0.5% to $2,369.49 an ounce. June delivery U.S. gold futures increased 0.6% to $2,374.60 per ounce.

Due in part to a declining dollar and lower Treasury yields, gold reached a three-week high on Wednesday. This came as data revealed that U.S. consumer prices increased less than anticipated in April, increasing the likelihood that the Federal Reserve would reduce interest rates.

By 1449 GMT, spot gold had increased by 0.5% to $2,369.49 an ounce. The June delivery of U.S. gold futures increased by 0.6% to $2,374.60 per ounce.

According to Phillip Streible, chief market analyst at Blue Line Futures, the consumer price index data "may be an early indication indicating over time inflation will decrease before the Fed will make its first interest rate cut."

The U.S. Consumer Price Index increased by 0.3% last month after increases of 0.4% in March and February. This indicates that inflation may have started to decline at the beginning of the second quarter, supporting expectations in the financial markets for a September interest rate reduction.

According to Reuters surveyed economists, the CPI would increase by 3.4% annually and by 0.4% on a monthly basis.

Other currency holders found gold more appealing as the dollar fell 0.4% vs a basket of other major currencies to reach its lowest level in more than a month. The benchmark 10-year Treasury rates fell to a level not seen in almost a month. [USD/] [US/]

In terms of technical advantages, the gold futures bulls have a strong overall short-term edge. The next upward price target for bulls is to finish June futures above strong resistance at $2,400.00, according to a note from Jim Wyckoff, senior analyst at Kitco Metals.

The CME FedWatch Tool indicates that traders are now pricing in a 70% possibility of a September rate drop in the United States. The opportunity cost of owning non-yielding gold is decreased by lower interest rates.

Palladium increased 1.2% to $989.45, spot silver up 1.2% to $28.93 per ounce, and platinum increased 1.7% to $1,048.40, reaching a nearly one-year high.