(Bloomberg) -- Gold and copper rose after US inflation came in lower than expected last month, reinforcing the view that the Federal Reserve is done hiking interest rates.
The consumer price index was little-changed in October, while the figure excluding food and energy rose less than expected, Bureau of Labor Statistics data showed Tuesday. The dollar and Treasury yields dropped significantly following the print, as traders essentially wiped out the chance of another rate hike. That boosted gold as much as 1.2%, the most on an intraday basis since Oct. 27.
The data will take some pressure off the Fed to tighten monetary policy again this year and give it room to cut rates earlier in 2024. Higher interest rates are generally negative for non-yielding assets like bullion.
Gold “is getting a boost from the below-expectation CPI as markets once again start pricing a less hawkish Fed,” said Bart Melek, global head of commodity strategy at TD Securities. “There will need to be confirmation that the US data is weakening over the next few weeks.”
Swaps traders are now pricing in two Fed rate cuts by July next year, from just one before the inflation data. Wall Street banks remain highly divided on just how quick policy loosening will come in 2024.
Spot gold rose to $ an ounce as of in New York.
Copper futures trading on the London Metal Exchange also benefited from the soft inflation print. Higher interest rates hurt key sources of demand for base metals, such as construction firms and manufacturers, while also curbing their appeal to investors.
Copper added to $ a metric ton on the LME. All other main base metals advanced.
--With assistance from Sybilla Gross.
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