Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
Gold pared earlier losses and rose above the $1,800 level once again after the latest US inflation data came in slightly lower than expected, which may ease fears that the Federal Reserve will be forced to taper its bond buying soon.
Spot gold gained 0.6% by 11:40 a.m. EDT, trading at a near one-week high of $1,806.10 per ounce. US gold futures were up 0.7% at $1,807.90 per ounce.
[Click here for an interactive chart of gold prices]
The US Labor Department said on Tuesday its Consumer Price Index (CPI), excluding the volatile food and energy components, edged up 0.1% in August, short of the 0.3% forecast by economists. This was the smallest gain since February, following a 0.3% rise in July.
The dollar declined after the inflation report, which may suggest that some of the upward pressure on inflation is beginning to wane.
This miss is a “good news for bullion”, making a September taper announcement from the Fed less likely, said Ed Moya, senior market analyst at brokerage OANDA, in a Reuters interview. The Federal Open Market Committee (FOMC) is scheduled to next meet on September 21-22.
Right now the gold market is still in a flux, given its inability to stab above the $1,800 level and could likely keep consolidating going into the FOMC meeting, Moya added.
The recent data could reinforce the view that the Fed may go slow on unwinding economic support measures and keep interest rates low, translating into reduced opportunity cost for holding non-interest bearing bullion.
(With files from Bloomberg and Reuters)
