LONDON (Reuters) – Gold turned lower on Wednesday after U.S. inflation data showed a suprise drop in consumer prices, and as the dollar reached session highs versus the euro, denting the metal’s appeal as an alternative investment.
Prices steadied, however, and remained rangebound amid conflicting signals on inflation and the outlook for equities.
Spot gold was bid at $889.05 an ounce at 1308 GMT (9:08 a.m. EDT) against $888.85 late in New York on Tuesday.
U.S. inflation data for March showed a dip of 0.1 percent in the consumer price index, against expectations for a rise of 0.1 percent. Consumer prices recorded their first annual drop since 1955.
“Short term, these figures are obviously not bullish for gold, but in the longer term you have to look past the current fall in inflation,” said Standard Bank analyst Walter de Wet.
“With all the quantitative easing and low interest rates, inflation is going to head up again. That is why gold only moved a few dollars.”
The precious metal is often bought as a hedge against rising inflation, and prices can be dented by deflationary signals.
On the foreign exchange markets, the dollar rose to session highs versus the euro in the wake of the numbers. A stronger dollar tends to weigh on gold, which is often bought as an alternative investment to the U.S. currency.
The euro earlier fell against the dollar after European Central Bank Governing Council member Axel Weber said the central bank will announce a package of “non-standard measures” in May
Full Story: http://www.reuters.com/article/hotStocksNews/idUSTRE53E0SW20090415