Gold Drifts Lower

Gold Drifts Lower

Gold drifts lower slowly reacting to this morning’s inflation data. The bullion is getting some support from a softened dollar that eased off a seven-week high in early morning trading.

The core personal consumption expenditures price index jumped 0.6% in January which is up 4.7% from the prior year. Wall Street had been expecting respective readings of 0.5% and 4.4%. The PCE is the Federal Reserve’s favorite inflation measure, and the data are likely to influence the central bank’s decisions at its March meeting. Fourth-quarter PCE data came in Thursday showing a 3.7% acceleration, an upward revision of the previous 3.2% pace. While gold slipped a bit on the data, the U.S. stocks dropped sharply: Dow Jones Industrial Average futures fell by 366 points, or 1.6%. S&P 500 and Nasdaq-100 futures slid 1.2% and 1.7%.

Front-month gold futures fell 0.8% Thursday to settle at $1,826.80 an ounce on Comex. The April contract is down 1.3% in this shortened trading week. Comex was closed along with other U.S. financial markets on Monday for the Presidents Day holiday. Bullion has dropped 6.1% so far this month and is poised to end the longest consecutive monthly rally since July 2020. It increased 6.5% in January and gained 3.8% in December. The metal fell $2.40 in 2022. Currently, the April contract is down $9.1 (-0.50%) an ounce to $1817.70 and the DG spot price is $1813.40.

The Fed is widely expected to raise interest rates to 5% and beyond over the coming months to continue to rein in high inflation after a series of recent economic reports showing that the economy is robust enough to take the hit that higher rates can sometimes be. 

Interest rate increases are considered bearish for gold because they make the metal less attractive as an alternate investment. 

The minutes of the last meeting of Fed policymakers on Jan. 31 and Feb. 1 came out Wednesday and indicated that officials remain concerned about high inflation and are resolved to continue to act to tackle it. 

“Participants noted that inflation data received over the past three months showed a welcome reduction int eh monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path,” the minutes said.

The Fed raised rates by 25 basis points Feb. 1 to 4.50% to 4.75%. The move followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. 

While most investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by another 25 basis points in March, more are anticipating a larger hike over the past week or so. In fact, the tool responded to this morning’s inflation data by raising its expectations of a 50 point jump. Investors anticipating a 25-basis-point hike dropped from 71.6% to 67.1%, while those expecting a 50 basis points jump rose from 28.4% to 32.9%. A week ago, 84.9% of those tracked were expecting a 25 basis point increase. 

Silver May futures dropped 1.7% Thursday to settle at $21.44 an ounce on Comex. The front-month contract has lost 1.9% so far this week. Silver is down 10% this month after falling 0.9% in January and rising 10% in December. It advanced 3% in 2022. The May contract is currently down $0.383 (-1.79%) an ounce to $21.055 and the DG spot price is $21.05.

Spot palladium tumbled 4.3% Thursday to $1,454.00 an ounce and is down 4.7% this week. Palladium has plummeted 13% so far this month after dropping 7.5% in January and retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is down $48.60 an ounce to $1410.00.

Spot platinum decreased 0.8% Thursday to $950.40 an ounce but has increased 2.5% so far this week. Platinum is down 7.2% in February after retreating 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. The current DG spot price is currently down $26.10 an ounce to $928.40.

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