Soft US Inflation raises questions on Tapering Timing

Introduction

Welcome back to our Gold News series. Our news highlights today discusses the impact of US inflation data on the global market and gold.

US Consumer Prices data indicated a 5.3% increase in the year to August, a slight increase compared to July figures of 5.4%. The moderation in inflation figures creates less urgency for the Fed to tighten policy, indicated by analysts at TD Securities.
Fed Chairman Jerome Powell has argued that higher inflation figures were pandemic driven. The pandemic had created shipping disruptions and computer chip shortages.
The Fed will meet next week to discuss the reduction in the bond-buying program. Tapering will benefit the dollar as it would mean that the central bank will be buying fewer debts assets, reducing the number of dollars in circulation.
The market and investors alike believe that the delay in the tapering announcement disrupts the economy and throws off markets.
Spot gold rose to US 1806/ounce following weaker than expected US inflation data. The tapering announcement is unlikely to be until November despite pressures from the market. The moderate inflation data suggests that FED will proceed slow on unwinding support and keep interest rates low. Lower interest rates decrease the opportunity cost of holding gold.