Gold prices steadies as inflation revives higher-rate bets

Gold held near record levels as renewed US inflation pressures reinforced expectations the Federal Reserve will keep interest rates elevated for longer.

Bullion traded near $4,700 an ounce after falling 0.6% Wednesday when data showed US wholesale inflation accelerated in April at the fastest pace since 2022, while benchmark 10-year Treasury yields climbed toward their highest level since July. Higher yields typically weigh on gold because the metal pays no interest.

The US Senate narrowly confirmed Kevin Warsh as Federal Reserve chair on Wednesday, raising questions over whether the central bank will maintain its tradition of independence from political pressure.

Concerns about Fed autonomy helped drive gold to record highs in January. Meanwhile, US consumer prices rose 3.8% in April from a year earlier, the fastest pace since 2023, according to data released Tuesday. Gasoline prices have climbed about 50% since the Iran war began, American Automobile Association data show, while the latest Bureau of Labor Statistics report pointed to rising costs for airfares, housing, clothing and food.

Gold has traded in a narrow band since tumbling in the early days of the Iran war as investors weigh inflation risks that could keep rates elevated against slowing growth that may eventually force central banks to ease policy. The conflict’s effect on energy markets and shipping routes has amplified uncertainty across commodities, currencies and global bond markets.

Silver, meanwhile, has surged 18% in May, driven more by speculative trading in thin liquidity conditions than underlying fundamentals, according to Nicky Shiels, head of research and metals strategy at MKS PAMP. Copper’s rally and supply concerns have also fuelled silver’s advance, she said, while silver, zinc and copper continue to show strong momentum signals as investor positioning builds.

Spot gold rose 0.1% to $4,693.33 an ounce as of 10 a.m. in London. Silver slipped 0.6% to $86.97 an ounce, while platinum and palladium also declined.

(With files from Bloomberg)