(Bloomberg) -- Gold jumped above US$2,400 an ounce to close in on the record price set in May, after an unexpected drop in U.S. consumer prices bolstered hopes that the Federal Reserve will soon start cutting interest rates.
Gold climbed as much as 2.3% after Bureau of Labor Statistics data showed a 0.1% monthly decline in consumer prices, marking the first negative reading in more than four years. Anotherkey core price gauge— which excludes food and energy — rose only 0.1%, further supporting the case for a September rate cut.
Gold has surprised many observers this year by surging to records despite high interest rates and sticky inflation that pushed out expectations for a Fed pivot. Prices have been buoyed by strong buying by central banks, haven demand from investors amid geopolitical tensions, and purchases by Chinese consumers.
Thursday’s figures indicate inflation is now easing again after a flareup at the start of the year, while broader economic activity appears to be slowing. On Wednesday, Fed Chair Jerome Powell concluded a second day of testimony in Washington, where he said the central bank doesn’t need inflation below 2% before cutting rates.
High rates have been a headwind for gold as a non-interest-bearing asset.
“Below-expected inflation data is compounding the precious-metals rally,” Ryan Mckay, a senior commodity strategist at TD Securities, said in a note. “A key macro cohort that has been on the sidelines thus far is increasingly likely to regain interest in gold.”
Spot gold rose 1.8% to $2,413.79 an ounce as of 2:29 p.m. in New York, bringing the metal into striking distance of the all-time high of $2,450.07. U.S. Treasury yields and the dollar fell. Silver rose 2%, while platinum and palladium also climbed.
--With assistance from Sana Pashankar.
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