Gold futures ended Friday’s session higher, after official data showed that producer price inflation in the U.S. rose more-than-expected last month, boosting the precious metal’s appeal as a hedge against inflation. Gold is considered a hedge against inflation risk, as prices tend to keep in step with consumer price increases.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery rose 0.9% on Friday to settle the week at USD1,390.05 a troy ounce. For the week, gold prices gained 0.55%. Gold futures were likely to find support at USD1,366.25 a troy ounce, the low from June 11 and near-term resistance at USD1,401.05, the high from May 28.
The Labor Department said Friday that producer prices rose by a seasonally adjusted 0.5% in May, above expectations for a 0.1% increase. Core produces prices rose at an annualized rate of 1.7% in May, in line with expectations and unchanged from the preceding month.
Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. Separate reports showed that U.S. industrial production was flat in May, while the capacity utilization rate fell unexpectedly last month.
Also Friday, Data showed that the University of Michigan consumer sentiment index fell unexpectedly in the current month after rising to the highest level in almost six years in May.
In the coming week, markets will be focusing on Wednesday’s Federal Reserve policy meeting, as investors look to Fed Chairman Ben Bernanke for any indication on when the U.S. central bank may start to unwind its easing policies.
Moves in the gold price this year have largely tracked shifting expectations as to whether the Fed would end its bond-buying program sooner-than-expected.
Elsewhere on the Comex, silver for July delivery rallied 2% on Friday to settle the week at USD22.01 a troy ounce. On the week, silver future prices rose 1.95%.
Source: Bullion Bulletin