Gold down as dollar roars on the near certainty that the Federal Reserve would raise interest rates at its next meeting. The dollar index hit its highest point since July 2020 in early morning trading.
Inflation’s rise, in line with expectations, did little to move the yellow metal this morning. The core personal consumption expenditures price index rose 4.9% from a year ago in December per the Department of Commerce report this morning. That is the fastest gain for this key inflation gauge since September 1983 and a just over the Wall Street forecast. Employment costs rose 4% from a year ago, the fastest jump in the data’s 20-year history, though the quarterly rise of 1% was less than expected.
The Fed is poised to act to combat soaring inflation, eliminating props to the economy that were put in place at the start of the COVID pandemic. Gold is a traditional hedge against inflation, so moves to rein it in are also bearish for the precious metal.
“I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that the conditions are appropriate for doing so,” Fed Chairman Jerome Powell said at a news conference Wednesday after the conclusion of the January meeting.
The CME FedWatch Tool shows that 100% of traders now expect a rate increase at the March meeting, compared with 56.5% a month ago. Money markets are now pricing in as many as five rate increases this calendar year, according to news reports.
Front-month gold futures dropped 2% Thursday to settle at $1,795.00 an ounce on Comex, the lowest closing price since Jan. 6. The April contract fell 2.1% in the first four days of the week. Gold advanced 2.9% in December — its best month since May — and climbed 4.1% in the fourth quarter. But it dropped 3.5% in 2021. Currently, the April contract is down $9.20 (-0.51%) an ounce to $1,785.80 and the DG spot price is $1,787.50.
Even so, gold prices, which reached a two-month high early in the week, remained supported by uncertainty over tensions between Russia and Ukraine and Western powers and the track of the omicron variant of the coronavirus.
The U.S. economy grew by 5.7% in 2021, the fastest full-year pace since 1984, according to data released Thursday by the Bureau of Economic Analysis.
March silver futures decreased 4.8% Thursday to $22.68 an ounce on Comex, as the front-month contract plunged 6.8% in the first four days of the week. Silver gained 2.4% in December and 5.9% in the fourth quarter, though it dropped 12% in 2021. Silver prices are tied to industrial demand. The March contract is currently down $0.226 (-1.00%) an ounce to $22.450 and the DG spot price is $22.48.
Spot palladium rose 0.5% Thursday to $2,384.50 an ounce and surged 13% in the first four days of the week. Palladium rallied 9.6% in December, but it fell 0.4% in the fourth quarter and 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price slid $45.60 an ounce to $2,324.50.
Spot platinum declined 2.4% Thursday to $1,029.20 an ounce, and it slid 1.3% in the first four days of the week. The metal gained 2.9% in December and 0.2% in the fourth quarter. It lost 9.4% last year. The DG spot price fell $26.30 an ounce to $1,002.50.
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