Gold trades near $1,200 after soft U.S. inflation data

Investing.com - Gold prices held on to strong gains on Thursday, after data showed that consumer price inflation in the U.S. rose less than expected in May, while prices excluding food and energy costs inched up modestly.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery hit an intraday peak of $1,203.40 a troy ounce, the most since June 1, before trading at $1,200.80 during U.S. morning hours, up $24.00, or 2.04%.

Futures were likely to find support at $1,171.90, the low from June 15, and resistance at $1,204.70, the high from June 1.

Also on the Comex, silver futures for July delivery soared 39.0 cents, or 2.45%, to trade at $16.33 a troy ounce. Elsewhere in metals trading, copper for July delivery rose 1.4 cents, or 0.53%, to trade at $2.618 a pound.

The U.S. Department of Labor said that consumer prices increased by 0.4% last month, below forecasts for a gain of 0.5%. Year-over-year, consumer prices were flat in May, in line with expectations.

Consumer prices, excluding food and energy costs, increased by 0.1% in May, missing expectations for a 0.2% increase. Core CPI rose at annualized rate of 1.7% in May, down from 1.8% in April.

A separate report showed that the number of individuals filing for initial jobless benefits last week fell by 12,000 to 267,000 from the previous week’s total of 279,000. Analysts had expected initial jobless claims to fall by 2,000 to 275,000 last week.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.7% at 93.82, the lowest level since May 18.

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

The dollar tumbled after the Federal Reserve lowered both its U.S. growth forecast and its interest-rate projections, prompting investors to push back expectations on the timing of an initial rate hike.

A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

Meanwhile, investors continued to monitor developments surrounding talks between Greece and its international creditors, amid growing concerns that the country could default on its debt be forced out of the euro zone.

Europe wants Greece to make spending cuts in order to secure a deal that will unlock €7.2 billion in bailout funds and prevent Athens defaulting on its debts when its bailout expires at the end of the month.

European finance ministers were to hold talks in Brussels later Thursday, but expectations for a deal were not high. Failure to strike a deal would result in Greece defaulting on payments and exiting the euro zone.