EBC Markets Briefing | Bullion torn between China buying and US rates

Gold prices slipped on Thursday following an encouraging inflation report and the Fed scaling back its rate cut expectations this year to one from three previously.

The consumer price index showed no increase in May as inflation slightly loosened its stubborn grip on the US economy. Core reading increased 0.2% on the month, compared with estimates of 0.3%.

Meanwhile, the central bank maintained its growth projections. Risky assets seem promising as the world’s largest economy will more likely manage to have “no landing” while reining in soaring prices.

But demand for gold in Asia is surging despite prices hovering near the record highs it hit in May, industry officials say, as buyers snap up the metal to hedge against geopolitical and economic uncertainty.

In Japan, there are more gold bulls than bears, according to Bullion Market Association; Chinese investors fret over currency devaluation, a protracted real estate downturn and trade tensions.

Lower confidence in other investment options is also a factor behind the demand for gold, analysts say. Lending further support to bullion, four Russian naval vessels have arrived in Cuba this week.

The yellow metal was still stuck in a tight range and Europe’s political scene in chaos could help it stay above the 50 SMA in the near term. But more catalysts are need to clear the hurdle of $2,350.

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