Gold Dips slightly on Inflation Data

Gold Dips slightly on Inflation Data

Gold dips slightly on this morning’s inflation data, after edged higher early Friday on a retreating dollar. The yellow metal is poised for a weekly decline as U.S. debt ceiling talks appeared to near resolution and amid speculation of the next moves by the Federal Reserve.

Inflation stayed high in April, raising concerns about interest rates could staying higher for longer. Per the Commerce Department, the personal consumption expenditures price index, rose 0.4% for the month excluding food and energy costs, higher than the 0.3% Dow Jones estimate. On an annual basis.

August gold fell 1.1% Thursday to settle at $1,962.30 an ounce on Comex. The front-month contract dropped 1.9% in the first four days of the week. Bullion is down 1,8% this month after increasing 0.6% in April and 8.1% in March. The metal fell $2.40 in 2022. The August contract is currently up $4.3 (+0.22%) an ounce to $1966.60 and the DG spot price is $1949.20.

U.S. President Joe Biden and House Speaker Kevin McCarthy are getting closer to an agreement to raise the debt ceiling, with just day to go before the government is likely to run out of cash and the U.S. could default on $31.4 trillion in debt. 

First quarter U.S. GDP data released Thursday showed the economy grew more than initial expected, easing concerns that the U.S. was poised for a recession. Weekly initial jobless claims showed that the labor market also remains resilient. 

Investors closely watch economic data, particularly on inflation and the labor market for indications whether the Fed will raise interest rates again in June or pause its series of rate hikes to curb inflation.

The morning’s inflation data quickly impacted the CME FedWatch tool which now shows about 47.2% of investors tracked by the tool are betting that the Fed will keep interest rates unchanged at the next meeting in June, while 52.8% expect another 25 basis point rate hike. A week ago, 82.6% of investors were expecting rates to remain unchanged. 

Higher interest rates are typically bearish for gold because they make the yellow metal less attractive as an alternate investment, but a pause or an end to the rate hikes would be bullish.

The minutes of the last Fed policy meeting, released Wednesday, showed that officials were split at last month’s meeting over additional rate increases. 

The Fed raised rates by another 25 basis points earlier this month. The Fed has raised rates by 25 basis points three times this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022. The federal funds rate is currently at 5.00% to 5.25%. 

July silver futures dropped 1.4% Thursday to settle at $22.91 an ounce on Comex. The front-month contract retreated 4.8% in the first four days of the week. Silver is down 9.2% this month after gaining 4.4% in April and 15% in March. It rose 3% in 2022. The July contract is currently up $0.325 (+1.42%) an ounce to $23.235 and the DG spot price is $23.22.

Spot palladium increased 1% Thursday to $1,441.00 an ounce and is down 6.4% this week. Palladium is down 5.5% this month after rising 2% in April and 3.7% in March. Palladium lost 5.7% in 2022. Currently, the DG spot price is up $20.30 an ounce to $1458.50.

Spot platinum decreased 0.2% Thursday to $1,031.50 an ounce and is down 4.2% this week. Platinum is down 5% in May after adding 8.5% in April and 3.7% in March. Platinum surged 10% in 2022. The DG spot price is currently up $5.80 an ounce to $1035.10.

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