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Gold Surged: US Inflation Data May Dampen Fed Rate Hike Move

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Bullions rebound

Gold on Wednesday, September 16, 2015, settled at $1,119 an ounce. Surging 1.5%, gold had its highest one-day gain it has seen in a month’s time. The figure is significantly small compared to the August high of $1,169 per ounce. Silver also rose 3.9% and settled at $14.88 an ounce. Platinum and palladium rose 1.83% and 1.92% respectively, from the previous day’s close.

The famous gold-backed SPDR Gold Shares (GLD) ETF also rose 1.33% alongside the surge in gold prices.

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DXY currency

Taking a call on the Federal meeting, the dollar index, the DXY, fell about 0.20% in a day’s trade on September 16. The DXY currency index gives a measure of the US dollar with respect to a basket of currencies such as the Euro, Japanese yen, pound sterling, and Canadian dollar. The dollar’s fall likely gave some ground to the yellow metal, and it climbed. A weakening dollar causes the yellow bullion to rise, as gold becomes less expensive for foreign investors.

Inflation data may cause further delay in rate hike

As inflation is one of the primary determinants for a Fed rate hike, an unexpected drop in inflation would likely further postpone the Fed’s decision to increase the interest rate in the current weak economy. The Fed’s target inflation figure of 2% remains significantly high, given the 0.1% CPI (Consumer Price Index) for August 2015. As gold is historically seen as a hedge against inflation, the rise in gold prices may likely be supported by these weak inflation figures, which further puts off a Fed rate hike.

Tracking the miners

As gold buoyed on September 16, gold miners such as the Agnico Eagle Mines (AEM), Kinross Gold (KGC), and Newmont Mining (NEM) also surged. These three stocks together make up ~13.5% of the market Vectors Gold Miners ETF (GDX).

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