Gold a tad below $1,500 after the release of U.S. Producer Price Index for July shows flat inflation after spending a big chunk of the week over that psychological line.
The PPI rose .2% for July as economists had forecast. The important Core inflation number, which does not reflect highly dynamic food and energy prices, was down .1%, the first decrease in almost five years.
December futures this week rose to the highest level for a most-active contract on Comex since 2013. Gold has strengthened in recent months trade tensions, slowing global growth and easing monetary policy.
Equity futures tumbled early Friday on a Bloomberg report that the White House is holding off on a decision about licenses for U.S. companies to restart business with China’s Huawei Technologies Co. after Beijing said it was halting purchases of farming goods. And – in a series of tweets Thursday – U.S. President Donald Trump bemoaned the strong dollar and called again for the U.S. Federal Reserve to lower interest rates. A weaker dollar typically increases gold’s luster as a hedge.
Expectations are growing that the Fed will follow its July 31 rate cut with a second one in September. The CME FedWatch Tool put the odds of a Sept. 18 rate cut at 100% Thursday, compared with 14.6% a week earlier. The tool put the probability of a 25-basis-point reduction at 88.1% and the likelihood of a 50-basis-point cut at 11.9%.
Gold rose 3.6% in the first four days of this week – and may have further to go. Goldman Sachs sees gold prices climbing to $1,600 an ounce over the next six months as investors seek havens, Bloomberg reported. Societe Generale also recommended that investors buy more gold, Barron’s said. Currently the December contracts on Comex are $1,507.60, that’s slightly down by $1.90.
The odds of a U.S. recession in the next 12 months rose to 35% in an August survey of economists from 31% in the July survey, Bloomberg reported. Economic growth will average 2.3% this year, down from the 2.5% seen last month. Economists see the U.S. entering its next recession in 2021.
But U.S. jobless claims declined last week, with the U.S. Labor Department report Thursday showing applications for unemployment benefits were down 209,000.
China’s producer price index fell for the first time in almost three years, while consumer price growth accelerated, Bloomberg reported. Factory prices fell 0.3% in July from a year earlier, a bigger decline than the median estimate of -0.1% by economists. The consumer price index rose 2.8% year-on-year, faster than forecast, according to data released by the National Bureau of Statistics on Friday.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded have risen 7.3% so far this year, Reuters reported.
Silver futures have outpaced gold this week on Comex. September futures were up 4.1% in the first four days of the week and settled down 1.5% Thursday at $16.94 an ounce. This morning’s PPI took a little shine off. The September number is now 16.195.
Spot platinum slipped Thursday but was up 2.4% for the week. Spot palladium increased. It was up 0.9% in the first four days of the week. Both are trending
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