Gold climbed to a record after another faster-than-forecast US inflation print and an uptick in applications for unemployment benefits substantiated bets that the Federal Reserve will cut interest rates next week.
The producer price index for final demand increased 0.2% from a month earlier after a downward revision to July’s reading, according to a Bureau of Labor Statistics report released Thursday. The median forecast in a Bloomberg survey of economists called for a 0.1% gain.
Initial jobless claims increased by 2,000 to 230,000 in the week ended Sept. 7, according to Labor Department data released Thursday. The median estimate in a Bloomberg survey of economists called for 226,000 applications.
Treasury yields and the dollar dipped after the readings, boosting bullion by as much as 1.2% to a fresh record of $2,542.33 an ounce. It pared some of the gains to trade at $2,539.52 as of 9:11 a.m. in New York. Silver, platinum and palladium all advanced.
Earlier Thursday, the European Central Bank lowered interest rates for the second time this year with inflation receding toward 2% and concerns about the economy building. That pushed the euro higher against the greenback, weighing on a gauge of the dollar strength.
“A cocktail comprising an ECB rate cut, small pickups in jobless claims and PPI has been enough to send gold to a fresh record high,” said Ole Hansen, head of commodities strategy at Saxo Bank.
Swap traders have cemented wagers on a quarter-point reduction by the Fed at its meeting next week after Wednesday’s consumer product index picked up in August.
For the gold market, “the beginning of a rate cutting cycle is likely to add support,” regardless of the size of the cut, Hansen added. Lower rates are typically positive for non-interest yielding bullion.
Bullion has risen by more than a fifth this year, with recent strength underpinned by growing expectations that the Fed will soon embark on a cutting cycle. Strong central-bank buying, and robust demand in the over-the-counter market, have also helped the precious metal’s rally.
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