Gold jumps after dismal U.S. inflation, retail sales data; Fed ahead

Investing.com - Gold prices rose to the highest levels of the session in North American morning trade on Wednesday, as lackluster U.S. data on inflation and retail sales saw investors temper expectations for more rate hikes by the Federal Reserve.

Comex gold futures were at $1,275.21 a troy ounce by 8:45AM ET (1245GMT), up $7.20, or around 0.6%. Meanwhile, spot gold was at $1,273.49.

Gold prices notched a fifth-straight decline on Tuesday after falling to its lowest since May 26 at $1,260.50.

Also on the Comex, silver futures tacked on 26.1 cents, or about 1.6%, to $17.02 a troy ounce.

U.S. consumer prices fell by 0.1% last month, disappointing forecasts for an increase of 0.1%, the Commerce Department said Wednesday.

Year-over-year, consumer prices were 1.9% higher from the same month a year earlier, missing expectations for a gain of 2.0%.

Consumer prices, excluding food and energy costs, inched up 0.1%, below forecasts for 0.2%. On an annualized rate, core CPI increased 1.7% last month, slowing from 1.9% in April.

A separate report showed that retail sales fell 0.3% in May from the prior month, below forecasts for a gain of 0.1%. Core retail sales, which exclude automobile sales, decreased 0.3% in May.

Investors now prepared for a rate hike by the Federal Reserve while awaiting what Chair Janet Yellen says about the future path of interest rates.

Market players will also pay close attention to details of the Fed's plan to reduce its $4.5 trillion balance sheet later this year.

The Fed is widely expected to raise the fed funds target range by a quarter point at the conclusion of its policy meeting at 2:00PM ET (18:00GMT) on Wednesday, which would put it in a range between 1.0%-1.25%.

The U.S. central bank will release its latest forecasts for economic growth and interest rates, known as the "dot-plot".

Fed Chair Janet Yellen is to hold what will be a closely-watched press conference 30 minutes after the release of the Fed's statement, as investors look for fresh hints on the pace of further tightening in the months to come and next year.

The median Fed policymaker forecast is for two more rate increases by year-end, after already raising its benchmark interest rate once this year, by a quarter percentage point in March.

But a recent run of disappointing U.S. economic data combined with growing uncertainty about the Trump administration's ability to pass tax and healthcare reforms sparked doubts over the Fed's ability to raise rates as much as it would like before the end of the year.

According to Investing.com’s Fed Rate Monitor Tool, conviction for a move beyond this week's widely expected rate hike has faded, with just 40% of market players expecting another rate increase later this year.