*
U.S. CPI comes in below estimates, core in line with
estimates
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Dollar down 0.7%, yields skid
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Market bets on 25 bps Fed hike in May, pause in June
(Adds details, comments, and updates prices)
By Deep Kaushik Vakil and Seher Dareen
April 12 (Reuters) - Gold prices jumped on Wednesday as
signs of cooling inflation bolstered bets that the U.S. Federal
Reserve may pause its policy tightening after a likely interest
rate hike in May.
Spot gold was up 0.6% at $2,014.39 per ounce by 2:10
p.m. EDT (18:10 GMT), after rising as much as 1.3% earlier. U.S.
gold futures settled 0.3% higher at $2,024.90.
The Consumer Price Index (CPI) climbed 0.1% in March after
advancing 0.4% in February. But in the 12 months through March,
the core CPI gained 5.6%, after rising 5.5% on the same basis in
February.
"The risks of not raising rates enough far exceeds
over-tightening so the Fed is probably going to go forward with
the quarter-point rate hike, the core justifies it," said Edward
Moya, senior market analyst at OANDA.
"There's still a tremendous amount of risk on the table, so
gold should still see some strong flows headed its way."
Gold drew strength from a slide in the dollar and benchmark
U.S. yields . Markets are now pricing in a 69% chance of a 25-basis-point
rate hike in the May meeting, followed by 2-to-1 bets of a pause
in June.
While gold is seen as a hedge against inflation, higher
rates to tame rising price pressures weigh on the non-yielding
asset's appeal.
Several officials at the Fed's meeting last month considered
pausing interest rate increases over concerns of wider financial
stress from the failure of two U.S. regional banks, but they
concluded that high inflation remained the priority, minutes
showed.
Whether the Fed will slow its rate hikes "largely depends on
the confirmation of economic cooling indicators, such as a
potential deterioration in the US job market," said Alexander
Zumpfe, a precious metals dealer at Heraeus.
Silver gained 1.5% to $25.45 per ounce, platinum added 2.5% to $1,019.22 and palladium rose 1.6% to
$1,469.52.
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Gold rally ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Deep Vakil and Seher Dareen in Bengaluru; editing
by Jonathan Oatis, Shilpi Majumdar and Shweta Agarwal)
