Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.6% to close near $1,273 after weak inflation and retail sales data undermined the dollar, increasing demand for alternative stores of value. The metal then surrendered those gains and more in electronic trade after the Fed raised rates and signaled another hike for later this year.

The Consumer Price Index fell in May, marking the second month of softer inflation in the past three. softened. The 12-month inflation rate also fell, dropping to 1.9%, or just under the Fed's target 2%.

Retail sales fell by 0.3%, the most in 16 months. While weak across the board, sales declines were led by a dramatic 2.4% plunge in gasoline and a 0.2% in auto sales.

The dollar fell 0.5% on the weak U.S. data, supporting gold and other commodities denominated in it for intentional trade by making them less expensive overseas. But trading patterns reversed themselves after the Federal Reserve concluded its two-day meeting on policy.

The central bankers raised interest rates by a quarter-point, which was widely expected. However, they also affirmed a third hike to come later this year, and their decision to start shrinking their $4.5 trillion balance sheet.

Traders were caught off guard, speculating that recent weakness in inflation and growth data would cause the Fed to delay a third hike, perhaps until next year. In electronic trade, gold fell around $10 an ounce to $1,263 and the dollar made up almost of its earlier gains.

The other precious metals were mostly higher before the Fed and lower afterward. Silver closed 2.2% higher at 17.14 before slipping back around 6 cents. Platinum gained 3% to $951, then gave up $19 after the Fed announcement. Palladium closed 0.4% lower at $853.80, then recouped around $2 in electronic trade.