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Spot Gold eases from 3-week high with US inflation in focus

Spot Gold retreated on Monday, as investor focus now sets on US producer price and consumer price inflation reports this week, which may provide more clues on the Federal Reserve’s interest rate trajectory.

Annual headline consumer inflation in the United States probably slowed to 3.4% in April, according to market consensus, from 3.5% in March.

Annual core CPI inflation probably eased to 3.6% in April from 3.8% in March.

“I suspect inflation will be stickier than people want to see, so we need to allow for a few bumps in the road – but that doesn’t necessarily mean inflation will rip higher,” City Index senior analyst Matt Simpson was quoted as saying by Reuters.

“It just won’t disinflate as quickly as doves hope. And that could result in some choppy trade for gold prices around these highs, at a time of year usually associated with negative returns for gold prices.”

April’s weaker-than-anticipated US Non-Farm Payrolls figures have added to Fed rate cut expectations for this year. The Federal Reserve is expected to deliver the first rate cut as soon as September.

Lower interest rates reduce the opportunity cost of holding Gold, which pays no interest.

As of 8:36 GMT on Monday Spot Gold was losing 0.72% to trade at $2,343.48 per troy ounce.

The yellow metal has pulled back from last Friday’s near three-week high of $2,378.56 per troy ounce.

Gold Futures for delivery in June were retreating 1.07% on the day to trade at $2,349.70 per troy ounce.

Elsewhere, Silver Futures for delivery in July were down 0.74% to trade at $28.295 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.03% to 105.287 on Monday.

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