Gold & Silver Jump vs. Falling Dollar as Official Inflation Holds at 2.0%, Swiss National Bank Ends Franc Sales

Gold jumped vs. the Dollar on Thursday, gaining 1.4% from yesterday's low to hit a 7-session high at $1245 an ounce as world stock markets gained and the US currency dropped to a 3-week low against the Euro.

Silver jumped to its best level in a month at $18.80, but broad commodity markets held flat and crude oil edged down to $77.20 per barrel.

New inflation showed US consumer prices rising as Wall Street analysts expected in May, up 2.0% year-on-year.

US Treasury bond prices ticked higher, offering 0.70% on two-year debt.

"[Gold's] fall in momentum of the past few days is against the backdrop of financial markets calming in general," says a note from Commerzbank, quoted by Platts.

"The largest Gold ETF, SPDR Gold Trust, has not recorded any inflows for some days now."

However, "There are growing signs that support on the downside is again growing firmer," says today's commodity note from Standard Bank's London office, "setting the scene for another break higher in the Gold Price.

"Over the past two days," analyst Walter de Wet adds, "there appears to be increased buying interest in the physical market."

UK gilts also pushed higher on Thursday as Sterling jumped on the forex market – and banking shares rose – following the new chancellor George Osborne's first Mansion House speech to the City of London last night.

Vowing to "introduce a bank levy and demand further restraint on pay and bonuses," the Conservative Osborne also announced the demise of current UK regulator, the Financial Services Authority, with the vast bulk of its responsibilities returning to the Bank of England.

Gold priced in Pounds reversed an earlier dip to £842 an ounce as Wall Street opened for business.

Eurozone investors wanting to buy gold today saw the price hold above €1000 an ounce.

"We remain short-term bullish as long as the Gold Price in Euros trades above €935 an ounce," says a note from Axel Rudolph, technical analyst at Commerzbank.

"An eventual advance above the current €1041 high will put the minor psychological €1050 level back on the map."

In the Eurozone debt market, the Spanish government followed Tuesday's disappointing auction of short-term bills – and the swiftly denied rumors of an emergency EU-IMF bail-out that followed – with the sale today of €3 billion in 10-year bonds.

The average yield demanded by today's investors was 4.864% per year, up from the 4.045% achieved at mid-May's auction of 10-year debt.

Comparable German debt was trading in the market on Thursday at 2.68% yield.

The Swiss National Bank meantime voted to keep its key interest rate on hold around 0.25%, but dropped all references to selling Francs for Euros – so as to depress its own currency – from the follow-up statement.

"You could take this as another risk-on signal for the Euro, we suppose," says the FT's Alpha blog, "but excuse us if we call it a Pyrrhic victory.

"The SNB did blow a billion a day on FX intervention back in April" and with no effect on the rising CHF/EUR exchange rate.

The Gold Price in Swiss Francs today bounced off a two-week low of CHF 44,100 per kilo, some 5.5% below last Tuesday's all-time record high.

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