Gold and silver jump as dollar extends losses on disappointing inflation data

Gold and silver made sharp gains on Thursday (18 June) as the dollar added to its losses following lower than expected consumer price inflation numbers from the US.

Platinum also made gains while palladium moved off the day's lows but both the metals largely held their downward track.

The yellow metal rose to $1,205, its highest since 25 May, from the previous close of $1,185.0. Silver, meanwhile, jumped to $16.46 from Wednesday's close of $16.09.

The USD index dropped to a one-month low of 93.57 on Thursday, weakening more than 0.5% on the day. The dollar has fallen 1.6% so far this week adding to the more than 2% loss over the previous two weeks.

Gold has risen more than 2% so far this week extending the 0.85% gain of last week. Technically, if the uptrend since mid-March continues, then the yellow metal will have room up to $1,240 before a correction within the channel. A level to watch ahead of that will be $1,220.

However, gold has still not escaped the big picture downtrend evident on the monthly chart. With the large downtrend since September 2011 still continuing, the metal has its eyes on $1,043 as a big support.

On the way down, $1,150 and then $1,131, the November low that was its weakest since late 2011, will be two levels to watch.

On the monthly chart, the 50-period moving average had taken a downward turn a few months ago confirming the big southward bias. On that chart too, $1,240 is a level of importance as it is endorsed by the 14-period SMA.

Overall, gold has been holding a $200-wide downward channel even as major fundamental factors wait to impact the greenback and precious metals generally.

The US consumer price inflation rebounded to 0% from a year earlier in May from -0.2% in the previous month as per Thursday's data but it trailed market expectations of 0.2%. The core measure eased to 1.7% from 1.8% against the consensus of a repeat.

Meanwhile, the Philadelphia Fed manufacturing index has risen sharply to 15.2 for June from 6.7 while the market had been expecting only a jump up to 8.0.

On Friday in Asia, gold traded at $1,200, off Thursday's peak of $1,205 while the dollar index held off the previous day's low of 93.57 trading near 94.0.