Gold Surges As U.S. Dollar Slumps After Inflation Data

(RTTNews) - Extending a recent upward trend, the price of gold moved sharply higher during trading on Wednesday, reaching the highest levels in three weeks.

Gold for August delivery surged $24.60 or 1.3 percent to $1,961.70 an ounce after rising $6.10 or 0.3 percent to $1,937.10 an ounce on Tuesday.

The precious metal benefited from a steep drop by the value of the U.S. dollar, with the U.S. dollar index slumping by 1.1 percent.

The tumble by the dollar and the jump in gold prices came after the Labor Department released a highly anticipated report showing consumer prices increased by less than expected in the month of June.

The Labor Department said its consumer price index rose by 0.2 percent in June after inching up by 0.1 percent in May. Economists had expected consumer prices to climb by 0.3 percent.

Excluding food and energy prices, core consumer prices still increased by 0.2 percent in June after rising by 0.4 percent in May. Core consumer prices were also expected to rise by 0.3 percent.

The report also showed the annual rate of consumer price growth slowed to 3.0 percent in June from 4.0 percent in May. Economists had expected the rate of growth to slow to 3.1 percent.

The annual rate of core consumer price growth also decelerated to 4.8 percent in June from 5.3 percent in May. The rate of growth was expected to slow to 5.0 percent.

While the Federal Reserve is still widely expected to raise interest rates by another quarter point later this month, the data has led to renewed optimism that will be the end of the central bank's rate-hiking cycle.