Gold rises for first week in four as market weighs better U.S. inflation data

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Gold prices scored their first overall weekly gain in four weeks, as signs of easing U.S. inflation raised hopes of an interest rate cut later this year from the Federal Reserve, with added support from political uncertainty in Europe.

Gold gained this week after both the U.S. Consumer Price Index and Producer Price Index data sets this week provided evidence of a softening in inflation, but gains were then pared after updated Fed projections showed the majority of members now only expect one rate cut this year.

That said, gold should remain firmly above the $2,250/oz level in the coming months, as its safe haven characteristic allows it to thrive from geopolitical uncertainty, and bullion’s lack of yield also supports the price, as a Fed rate cut will arrive eventually, BMI analysts said, according to Dow Jones.

While a strong U.S. dollar could limit a significant recovery in gold prices, decreasing Treasury yields might offer some support, and gold should continue to benefit from continuing political uncertainty with upcoming elections in Europe and the U.S., Pepperstone strategist Quasar Elizundia said.

Front-month Comex gold (XAUUSD:CUR) for June delivery closed +1.1% to $2,331.40/oz for the week, while front-month June silver (XAGUSD:CUR) settled +0.2% to $29.402/oz for the week.

But on Friday, gold bounced 1.3% and silver rebounded 1.4%, a day after posting their worst settlements since early to mid-May.

ETFs: (NYSEARCA:GLD), (NYSEARCA:GDX), (GDXJ), (IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ), (SLV), (PSLV), (SIVR), (SIL), (SILJ)

While gold prices are 19% higher than a year ago, the benchmark VanEck Gold Miners ETF is up by less than half that.

Some analysts have become more optimistic about the outlook for gold mining stocks, as they forecast even higher metal prices that could lift miners’ margins at a time when many have struggled to contain cost inflation.

One the other hand, the growth in gold ETFs has made it easier for investors to get direct gold market exposure, and gold mines are now significantly less productive than they were 20 years ago, undermining equity returns, Liberum analysts said.