Rate Rises as Consumer Inflation Cools

The spot price of gold was up 1.3% to $2,387.97 per ounce as of 4:30 p.m. ET Wednesday, after a report showed consumer inflation slowed in April, lifting hopes the Federal Reserve may cut interest rates, which would be bullish for gold.

The Labor Department reported April’s Consumer Price Index (CPI) was up 0.3% from the month before, down from the 0.4% gains in both February and March. The year-over-year increase of 3.4% eased from 3.5% in March.

The core rate of inflation, which leaves out volatile food and energy prices, came in at an annual rise of 3.6%, the lowest since April 2021.

April Retail Sales Below Expectations

A report from the Commerce Department on Wednesday showed retail sales were virtually unchanged in April from the month before, suggesting consumers may be pulling back. Economists had been anticipating a gain of 0.4% after a 0.6% jump in March. Excluding autos and gas, sales declined 0.1% versus the predicted 0.1% advance.

Sales at non-store retailers, which include online purchases, posted the biggest drop of any category at 1.2% versus March.

Rising Expectations of September Rate Cut

The economic news led to a shift in expectations of the probability of policymakers reducing interest rates in September, according to the CME’s FedWatch Tool based on fed funds futures pricing data. Markets are now pricing in a 75% chance of a rate cut in September, an increase of 10 percentage points from Tuesday.