Underneath the momentum is down

Gold fell after the Fed strengthened its warning about cutting interest rates after U.S. inflation data. Gold fell after new economic data reinforced expectations that the Fed will be cautious about lowering borrowing costs. Prices paid to U.S. manufacturers rose by the most in six months in February, driven by higher fuel and food costs that suggest inflation remains high. Labor Department data showed on Thursday that the producer price index for final demand rose 0.6 percent from January. The measure rose 1.6 percent from a year earlier, the biggest annual increase since September. U.S. retail sales, meanwhile, rose less than forecast after a sharp decline to start the year. Treasury yields and the dollar rose sharply after the data reports, and bullion fell as much as 0.7 percent to $2,158.63 an ounce. The PPI data and the consumer price index released earlier this week suggest inflation remains sticky. That leaves a bumpy road ahead for the Fed’s 2% inflation target. Policymakers need to see more evidence that inflation is heading that way before they cut rates, he said. Fed officials “have been cautious for some time and continue to be so. The PPI number hasn’t changed that outlook,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. Still, despite Thursday’s pullback, bullion remains elevated after a long rally.