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Gold drops over 1% after in-line US inflation data

Gold drops over 1% after in-line US inflation data
Gold drops over 1% after in-line US inflation data

The gold price?extended its losses on Wednesday following?U.S. The inflation data was largely in line with expectations. This increased bets that the Federal Reserve will raise interest rates next month. Investors also anticipated remarks from Chairman Kevin Warsh.

Gold prices fell by 1.3% at 1:57 pm EDT (1757 GMT) after they had reached their highest level since May 14, on Tuesday. U.S. gold futures ended 0.9% lower, at $4653.30.

Dollars rose by 0.3% making the greenback more expensive to holders of other currencies.

Peter Grant, Zaner Metals' vice president and senior metals strategist, said that the gold price's action before today's data is just profit-taking. The PCE data came in largely as expected, so at this stage, we are consolidating within yesterday’s range.

Bureau of Economic Analysis of the Commerce Department reported on Wednesday that the Personal Consumption Expenditures Prices Index, which is used by the Fed to determine its inflation target, had increased 3.7% over the past 12 months. The economists polled had predicted a reading between 3.6% and 3.7%.

According to the CME FedWatch tool, traders now expect a 40% rate hike in the next month compared to 36% prior. They also price in a 60% chance that rates will remain unchanged.

In an environment of high interest rates, gold that does not yield is often less appealing.

"I believe?the gold uptrend is beginning to reassert its self." Grant added that he sees a 'potential return to?above $5,000 in this year.

A senior Iranian source stated on Wednesday that Iran and Oman were still working on the specifics of an agreement regarding the Strait of Hormuz. This is after Iran's Revolutionary Guards had said that the two countries had agreed on how to divide the waterway and the revenue.

Silver fell by 1%, to $67.93 an ounce. Platinum dropped by 1.4%, to $1,831.67. Palladium declined 0.1%, to $1,324.63. (Reporting from Bengaluru by Pablo Sinha. (Editing by Jonathan Ananda Mark Potter and Aurora Ellis.)

(source: Reuters)