Gold price rises on bets of Fed interest rate cuts
Gold rose after a softer-than-expected inflation reading bolstered bets that the Federal Reserve will cut interest rates later this year.
Underlying US inflation rose in May by less than forecast for the fourth month in a row, suggesting companies are finding ways to limit how much of higher costs from tariffs they pass through to customers.
The dollar and bond yields pushed lower after the print, sending bullion higher by as much as 1.1% before paring some of the gains. Bullion typically benefits from a lower rate environment as it pays no interest.
Gold is helped by the benign reading in inflation, which lifted the prospect for a rate cut, perhaps sooner than the October date currently priced in by the market, according to Ole Hansen, head of commodities strategy at Saxo Bank A/S.
Still, the precious metal is hovering around its recent ranges and “we need to see economic data deteriorate further” for gold prices to break away, said Hansen.
Uncertainties over global trade tensions have rattled markets this year, boosting gold’s allure as a store of value in turbulent times and powering a year-to-date advance of nearly 27%. While the rally has cooled in recent weeks, lingering worries over the economic impacts of Trump’s tariff policies are keeping the precious metal close to a record reached in April.
The metal held gains even as Trump said a trade framework with China was completed that included an agreement for Beijing to supply rare earths “up front,” as well as allowing Chinese students into American universities.
Platinum, meanwhile, extended this year’s surge to more than 40%, as the market strains under signs of tightness.
The price of platinum — used in jewelry and autocatalysts, as well as in the chemical and glass industries — rose as much as 5.2% to $1,283.79 an ounce on Wednesday. After trading largely sideways at around $1,000 for the best part of a decade, the white metal is now at the highest in more than four years.
The gains come as the physical platinum market heads for another year of deficit, boosted by strong Chinese demand for a cheaper alternative to gold jewelry. A dramatic outflow of platinum to the US in the first few months of 2025 — over fears that imports would be subject to Trump’s tariffs — further tightened the availability of the metal in the largest spot trading hubs of Zurich and London.
The implied cost of borrowing the precious metal for one month reached the highest in two decades at an annualized rate of 15%, while forward prices for platinum are trading a steep discount to spot, both indications of tightness.
“It’s been a long time coming, but the investor space is starting to buy into the platinum tightness now,” said George Heppel, an analyst at BMO Capital Markets.
Platinum output in South Africa — by far the world’s biggest producer — has declined this year amid heavy rains and other disruptions. That’s helped to underpin the price gains, boosting the shares of miners such as Anglo American Plc spinoff Valterra Platinum Ltd. and its rivals Impala Platinum Holdings Ltd. and Sibanye Stillwater Ltd.
Those producers have come under pressure from the worldwide rollout of electric vehicles, which don’t use platinum or sister metals palladium and rhodium.
“Platinum is a sunset market, it’s a market declining in size,” said Heppel.
Bullion rose 0.3% to $3,334.78 an ounce as of 10:35 a.m. in New York. The Bloomberg Dollar Spot Index declined 0.2%. Silver fell, while palladium rose.
