US Inflation Slows Down, World Gold Price Back To The Green Zone

JAKARTA - The price of gold was higher at the end of trading Friday, July 28, turning higher from the sharp decline the day before.

The strengthening was due to the weakening United States (US) dollar following the Japan Central Bank's decision to adjust its monetary policy framework, and US inflation is showing a slowdown.

Citing Antara, the most active gold contract for August delivery in the Comex New York Exchange Division jumped 14.70 US dollars, or 0.75 percent, to settle at 1,960.40 US dollars per ounce, after touching the highest session at 1,962.20 US dollars and the lowest at 1,944.20 US dollars.

Gold futures plunged 24.40 US dollars or 1.24 percent to 1,945.70 US dollars on Thursday (27/7), after lifting 6.40 US dollars or 0.33 percent to 1,970.10 US dollars on Wednesday (26/7), and a slight increase of 1.5 US dollars or 0.08 percent to 1,963.70 US dollars on Tuesday (25/7).

The US dollar weakened after data showed annual US inflation in June rose at the slowest rate in more than two years, which could push the Federal Reserve closer to ending its interest rate hike cycle.

The dollar index, which measures the greenback against six other major currencies, fell 0.1 percent to 101.65, while the Japanese yen strengthened to 140.96 against the US dollar.

The US annual inflation in June increased with the smallest number in more than two years, with underlying pressure on moderate prices. If the trend continues, it could push the Federal Reserve closer to ending the fastest rate hike cycle since the 1980s.

The core inflation rate, which ignores volatile food and energy prices, rose 4.1 percent in the last 12 months to June, down sharply from a 4.6 percent increase in May, but it still puts it at a low of more than two years. However, it is still well above the Fed's target of 2.0 percent.

"The focus is back on growth and how much growth the US economy can maintain without even higher beating inflation," said Adam Button, Head of Currency Analysts at ForexLive in Toronto.

The stronger US dollar and higher Treasury yields helped burden gold prices earlier this week as the Federal Reserve and European Central Bank announced their latest interest rate hikes.

In other US economic news, consumer spending rose 0.5 percent in June as a sign of confidence in the economy as inflation eased again and the US economy continued to grow.

Earlier, the Central Bank of Japan said it would loosen its grip on the Japanese Government bond yields, a decision that sends a shockwave through the international bond market and drives yields from JGB 10 years to its highest level since 2014, according to FactSet data.

The yield from 10 years of JGB increased 54 basis points to 0.545 percent, the highest level since September 2014.

Analysts view the latest golden move as a sign that prices could rise further, although expectations for higher international bond yields could also dampen yellow metal prices.

"From a technical point of view, gold slightly rebounded from yesterday's lows at $ 1,940, which is now considered the first support zone, and this represents a positive signal," Rupert Rowling, market analyst at Kinesis Money, said in an emailed comment.