Gold Ends Higher As Soft Inflation Could Delay Rate Hike

(RTTNews) - Gold futures jumped to end at a one-week high on Wednesday, ahead of the Federal Reserve's monetary policy meet conclusion, after the consumer-price report from the U.S. showed inflation to have ticked down, falling short of the Fed's target for a rate hike.

The employment and inflation numbers are seen as the two key factors that guides the Fed plans for its first interest-rate hike in nearly a decade.

A Labor Department report on Wednesday showed a modest drop in U.S. consumer prices in August, reflecting mainly a steep drop in energy prices.

With the Fed meeting in progress, it seems likely the central bank will delay raising interest rates until at least December.

But stocks have been volatile recently on the possibility policy makers will begin tightening this month.

Nevertheless, global equity markets rallied on Wednesday after a strong rebound in Chinese stock market provided some relief, following the steep declines witnessed in the past two sessions. China's Shanghai Composite index ended the session with a gain of 4.89 percent, marking its biggest single-day gain since August 27.

Gold for December delivery, the most actively traded contract, jumped $16.40 or 1.5 percent, to settle at $1,119.00 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for December delivery scaled an intraday high of $1, 123.70 and a low of $1,103.00 an ounce.

On Tuesday, gold prices for December delivery dropped $5.10 or 0.5 percent, to settle at $1,102.60 an ounce, as investors weighed a slew of economic data ahead of the outcome of the Federal Reserve's two-day policy Federal Open Market Committee meet starting Wednesday.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 678.18 tons on Wednesday from its previous close.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 95.26 on Wednesday, down from its previous close of 95.60 in late North American trade on Tuesday. The dollar scaled a high of 95.85 intraday and a low of 95.16.

The euro trended higher against the dollar at 1.1304 on Wednesday, as compared to its previous close of 1.1269 in North American trade late Tuesday. The euro scaled a high of 1.1322 intraday and a low of 1.1215.

On the economic front, a Labor Department report on Wednesday showed a modest drop in U.S. consumer prices in August, reflecting a steep drop in energy prices. The consumer price index edged down by 0.1 percent in August after inching up by 0.1 percent in July. Economists expected prices to come in unchanged.

Homebuilder confidence in the U.S. continued to improve in September, a report from the National Association of Home Builders said Wednesday, with the housing market index reaching a near ten-year high. The NAHB/Wells Fargo Housing Market Index crept up to 62 in September from 61 in August, while economists had expected the index to come in unchanged.

Eurozone inflation slowed to 0.1 percent in August from 0.2 percent in July, final data from Eurostat showed Wednesday. The rate for August was revised down from 0.2 percent.

Inflation remains well below the European Central Bank's target of 'below, but close to, 2 percent over the medium term'.

Eurozone's labor costs increased at a slower pace in the three months ended June, figures from Eurostat showed Wednesday. Hourly labor costs climbed 1.6 percent year-over-year in the second quarter, following a 1.9 percent hike in the preceding month, revised down from 2.2 percent. In the fourth quarter last year, the rate of growth was 1.3 percent.

U.K. wages grew at the fastest pace in over six years and the unemployment rate declined in the three months to July, signaling a buildup of inflationary pressures, underpinned by household income.

Pay excluding bonuses increased 2.9 percent from the same period of last year, which was the fastest growth since early 2009, the Office for National Statistics reported Wednesday.

The unemployment rate was unchanged from the quarter ended April, but below 6.2 percent seen in the same period of last year.

UK households' finance outlook rebounded in September to the highest level in six months on lower inflation pressures, results of a survey by Markit Economics and financial information provider Ipsos Mori revealed Wednesday.

The seasonally adjusted Markit Household Finance Index rose slightly to 43.7 in September from August's eight-month low of 43.4.