PRECIOUS-Gold eases after surprise U.S. CPI jump, holds above $1,400/oz

Reuters

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    * Analyst sees gold's decline as a kneejerk reaction by
market
    * Palladium erases gains after hitting 16-week high

 (Updates prices)
    By Karthika Suresh Namboothiri
    July 11 (Reuters) - Gold prices slumped 1% on Thursday,
erasing gains posted earlier in the session after
stronger-than-expected consumer inflation in the United States
cast doubts whether the U.S. central bank will cut interest
rates as aggressively as expected.
    Spot gold  XAU=  shed 1% to $1,404.40 per ounce as of 1:30
p.m. EDT (1730 GMT), dropping nearly $15 after U.S. consumer
prices demonstrated a pick-up in underlying inflation,
increasing in June by the most in nearly 1-1/2 years.  urn:newsml:reuters.com:*:nLNSBIEF6Y
    U.S. gold futures  GCcv1  settled 0.4% lower to $1,406.70
per ounce.
    Gold prices had touched a one-week high of $1,426 earlier in
the session.
    The Federal Reserve last month downgraded its U.S. inflation
projection for 2019 to 1.5% from the 1.8% projected in March.
    However, this may probably not change expectations the U.S.
central bank will cut interest rates this month.
    "We saw today's inflation data - the markets started to back
off today because it challenges the need for additional rate
cuts," said Chris Gaffney, president of world markets at TIAA
Bank, calling bullion's decline a kneejerk reaction.
    Thursday's move "is just an adjustment of the fact that
maybe it had gone up a little fast yesterday, but is still
holding nicely above $1,400, and it looks like we going to
continue holding above $1,400," he added.
    Spot gold rose 1.5% on Wednesday after Fed Chair Jerome
Powell's dovish remarks, where he confirmed the U.S. economy was
still under threat from disappointing factory activity, tame
inflation and a simmering trade war, and said the Fed stood
ready to "act as appropriate."  urn:newsml:reuters.com:*:nL2N24B1B9
    This statement weighed on the dollar. The U.S. currency
against major other currencies  .DXY  was largely tepid for a
second session.  USD/ 
    Policymakers from the U.S. central bank are scheduled to
meet on July 30-31, where investors will look for further cues
on monetary policy easing.
     Gold in June rallied to a six-year peak of $1,438.63 an
ounce, largely on the back of expectations of rate cuts by key
central banks amid concerns over the global economy. 
    "A break above $1,438 may lead to further buying orders with
$1,500 being the next level traders looking to target," Hussein
Sayed, chief market strategist at FXTM, wrote in a research
note.
    Indicative of investor sentiment, holdings of SPDR Gold
Trust  GLD , the world's largest gold-backed exchange-traded
fund, rose 0.8% on Wednesday.  GOL/ETF 
    Among other precious metals, palladium  XPD=  erased gains
and dipped 1.7% to $1,561.86 per ounce, having earlier hit a
high of $1,605.52.
    Silver  XAG=  was down 0.9% to $15.10, while spot platinum
 XPT=  dipped 0.8% to $818.

 (Reporting by Karthika Suresh Namboothiri in Bengaluru, editing
by G Crosse)
 ((karthikasuresh.namboothiri@thomsonreuters.com;
+1-651-848-5832, outside N.America, +91-80-6749-0997; Reuters
Messaging:
karthikasuresh.namboothiri.thomsonreuters.com@reuters.net))

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