Gold suffered first in five weekly loss as US inflation fuels the Fed’s taper rhetoric By Investing.com

By Barani Krishnan

Investing.com – Gold recorded its first weekly loss in five years as brief euphoria of long years over grim US jobs report for August gave way to dismay as the dollar rebounded on talks relentless cuts in the Federal Reserve stimulus.

on the New York Comex closed down $ 7.90, or 0.4%, at $ 1,792.10 an ounce. For the week, it fell 2.3%, its highest level since the week of July 29. It was also the first weekly loss of Comex gold since the end of July.

Friday’s drop in gold was in part influenced by data showing U.S. producer prices rose 8.3% in August, their highest level in more than a decade, as inflationary pressure was growing relentlessly in an economy trying to break out of the chains of the coronavirus pandemic.

The Fed’s stimulus package and other monetary accommodations have been blamed for exacerbating price pressures in the United States.

The central bank has bought $ 120 billion in bonds and other assets since the March 2020 Covid-19 outbreak to support the economy. It has also kept interest rates at virtually zero levels for the past 18 months.

The question of when the Fed should cut its stimulus and raise interest rates has been hotly debated in recent months as the economic recovery clashes with a resurgence of the Delta variant of the coronavirus. The argument for a cut, however, weakened considerably after US job growth for August was 70% below economists’ target.

The dollar first fell on this jobs report, fueling the gold rally to a four-week high of nearly $ 1,837. But almost immediately after that, the Dollar Index, which pits the dollar against six major currencies, rebounded, sending gold to a low of just over $ 1,783.After declining 3.5% in 2020 following business closures due to Covid-19, the US economy has experienced strong growth this year, growing 6.5% in the second quarter, as forecast by the Federal Reserve.

The Fed’s problem, however, is inflation, which has outpaced economic growth. The Fed’s preferred indicator for inflation – the core index of personal consumption expenditure, which excludes volatile food and energy prices – rose 3.6% over the year to ‘in July, its highest level since 1991. The PCE index, including energy and food, rose 4.2% year-on-year. year.

The Fed’s inflation target is 2% per year.