Gold slipped below $2,000 an ounce early Friday, but still aims for second straight weekly gain. The yellow metal is under pressure from higher Treasury yields, after the sharpest increase in U.S. monthly inflation in 40 years, as investors eye likely U.S. rate hike.
Futures were heading for a weekly rally, though, as investors continued to flock to haven assets because of the conflict between Russia and Ukraine. Platinum headed for its worst weekly decline since November.
Front-month gold futures rose 0.6% Thursday to $2,000.40 an ounce on Comex and gained 1.7% in the first four days of the week. Gold advanced 5.8% last month after dropping 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is currently down $32.90 (-1.64%) an ounce to $1967.50 and the DG spot price is $1,968.70.
The U.S. consumer price index rose 7.9% in February from the year earlier, the highest level since January 1982, according to data released Thursday by the Bureau of Labor Statistics. The crisis in Ukraine added to what were already soaring prices for energy, food and other commodities. The increase exceeded the 7.8% gain forecast by economists surveyed by Dow Jones.
The inflation numbers reinforce anticipation of a Federal Reserve rate increase next week when the central bank’s policymakers meet. Fed Chairman Jerome Powell told a congressional panel last week that he would support a quarter-point rate increase at the March meeting, though some investors have speculated that the rate hike could be higher.
Higher interest rates are typically bearish for gold because other assets become more attractive to investors. But the yellow metal is a traditional hedge against inflation.
In Ukraine, President Volodymyr Zelensky countered Russian suggestions that Ukraine was preparing an attack with chemical weapons. He said Ukraine hadn’t developed chemical or biological weapons and that he was worried that Russia would do the very thing it’s accusing Ukraine of. Meanwhile, the U.S. Senate passed a government funding bill that includes $13.6 billion in aid for Ukraine.
U.S. President Joe Biden is expected to announce Friday that each G-7 and European Union country will seek to revoke Russia’s “most favored nation” status, the term for normal trade relations. Each country will have to go through its own process. In the U.S., this would require an act of Congress.
Front-month silver futures advanced 1.7% Thursday to $26.26 an ounce on Comex and is up 1.8% this week. Silver surged 8.8% in February after dropping 4.1% in January. It fell 12% in 2021. Silver prices are tied to industrial demand. Currently, the May contract is down $0.326 (-1.24%) an ounce to $25.930 and the DG spot price is $25.77.
Spot palladium rose 1.3% Thursday to $2,995.00 an ounce, but is down 0.2% so far this week. It surged 25% last week. Russia produces about 40% of the world’s palladium, and the metal’s man use is in catalytic converters for gasoline-powered vehicles. There are already vehicle shortages and price increases for automobiles, and Russia’s Nornickel is the world’s largest supplier of palladium. The metal gained 5.3% last month after rallying 24% in January. It retreated 22% in 2021. The volatility continues this morning with the DG spot price currently down $161.50 an ounce to $2,809.00
Spot platinum slipped $1 Thursday to $1,082.40 an ounce and is down 3.5% this week. The metal advanced 1.7% in February after rising 5.7% in January. It lost 9.4% last year. The current DG spot price is down $14.90 an ounce to $1,073.30.
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