Gold back above $1900, sparked by Thursday’s disappointing GDP numbers and despite this morning’s inline inflation data. The yellow metal retracing some of this week’s losses early Friday but still poised for its worst month in seven amid investor anticipation of aggressive Federal Reserve interest rate increases to combat 40-year highs in inflation.
The Fed’s favorite inflation measure shows inflation was ever so slightly down in March. The core personal consumption expenditures (CPE) price index was 5.2%, slightly below February’s 5.3%, its highest point since April 1983, AND below Wall Street’s 5.3% forecast. Employment costs accelerated 1.4% in the past quarter, while inflation-adjusted income declined 0.4% in March.
Front-month gold futures rose 0.1% Thursday to settle at $1,891.30 an ounce on Comex, though the June contract decreased 2.2% in the first four days of this week. Gold is down 3.2% so far this month after advancing 2.8% in March. It rose 6.9% in the first quarter and retreated 3.5% in 2021. Currently, the June contract is up +17.90 (+0.9464%) an ounce to $1,909.20 and the DG spot price is $1,903.90.
There is speculation that yesterday’s disappointing U.S. GDP number could take some pressure off the Fed to follow through with the aggressive tightening it’s been hinting at, a rhetoric that has pressured gold in recent weeks. The Fed is set to meet next week and announce the next rate increase. Almost all investors expect the Fed to raise interest rates to a range of 0.75% to 1% at the bank’s May 4 meeting, according to the CME’s FedWatch Tool. The Fed boosted rates by a quarter percentage point to 0.25% to 0.5% in March, in the first hike since 2018.
As noted, the U.S. economy unexpectedly fell in the first quarter, according to data released Thursday by the Commerce Department. Gross domestic product declined at a 1.4% annualized pace, missing the Dow Jones consensus forecast of a 1% gain. The economy was coming off its best performance since 1984 and it was the first quarter that the economy unexpected shrank since the pandemic began in 2020. Meanwhile, U.S. initial jobless claims fell by 5,000 to 180,000 last week, holding at multidecade lows.
The gold market remains supported the war in Ukraine and coronavirus-related lockdowns in Asia, because the precious metal is a traditional hedge against uncertainty.
In other economic news, the stock markets are heading into a week ending slump, with the NASDAQ headed for its worst month since March 2020.
Front-month silver futures dropped 1.4% Thursday to settle at $23.18 an ounce on Comex, and the July futures contract declined 4.7% in the first four days of the week. Silver is down 7.8% so far in April after gaining 3.1% in March. It rose 7.6% in the first quarter after falling 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently down -0.071 (-0.31%) an ounce to $23.12 and the DG spot price is $23.10.
Spot palladium rose 0.5% Thursday to $2,259.50 an ounce, though it tumbled 6.5% in the first four days of the week. Palladium touched a record $3,440.76 in March. Russia produces about 40% of the world’s palladium, and Russia’s Nornickel is the world’s largest supplier of palladium. The metal is down 1.4% so far this month after declining 8.5% in March. It gained 20% in the first quarter and retreated 22% in 2021. Currently, the DG spot price is up $78.90 an ounce to $2,339.30.
Spot platinum rose 0.3% Thursday to $932.80 an ounce and fell 0.6% in the first four days of the week. The metal has retreated 6.9% so far this month after dropping 4.2% in March. It increased 2.9% in the first quarter after losing 9.4% last year. The DG spot is currently up $10.80 an ounce to $940.90.
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