Gold dropped early Wednesday after yesterday’s report showing soaring U.S. inflation data bolstered expectations that the Federal Reserve will leave interest rates unchanged for some time. This morning’s producer price index data served to reinforce the concerning inflation outlook.
The PPI rose 1.4% for April, much higher than the 0.5% forecast and the upwardly revised 0.7% March increase. The primary driver is energy costs, though price pain was showing beyond the gas pump.
Yesterday’s consumer price index data climbed sharply last month, with the headline figure for April increasing 3.8% compared with a year earlier, the biggest annual jump in three years amid the war in Iran. The figure also surpassed economists’ expectations by 0.1 percentage point. The April number came in at 3.3% in March. Another inflation report, the producer price index, is due out Wednesday.
June gold futures fell 0.9% Tuesday to $4,686.70 an ounce on Comex, and the most-active contract declined 0.9% in the first two days of the week. Bullion dropped 1% last month after sliding 11% in March and climbing 11% in February. It rallied 64% last year. $4689.10 and the DG spot price is $4678.40.
The Iran conflict has resulted in the closure of shipping traffic through the Strait of Hormuz, a critical oil artery, sending oil prices soaring and raising fears of persistent inflation. Core CPI, which excludes volatile fuel and energy prices, was up 2.8% year on year, the highest level since January 2025 and well above the Fed’s 2% target.
The Fed last month held interest rates steady at 3.5% to 3.75%, as expected, but policymakers were unusually divided. Almost 98% of the investors tracked by the CME FedWatch Tool are betting on rates staying unchanged again in June. The Iran war has erased expectations that the Fed would cut interest rates this year. Most investors tracked by the tool now expect the central bank to keep U.S. interest rates unchanged this year and more anticipate a rate increase than a rate cut in the latter half of next year.
Higher interest rates are typically bearish for gold, making it more expensive for holders of other currencies.
The Fed has kept interest rates unchanged this year after three previous rate cuts. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts in 2024.
Front-month silver futures lost 0.4% Tuesday to settle at $85.59 an ounce on Comex, though the July contract increased 5.8% so far this week. The most-active contract touched a record above $115 in January. Silver lost 1.2% in April after dropping 20% in March and gaining 19% in February. It rose 141% last year. The July contract is currently up $2.189 (+2.56%) an ounce to $87.780 and the DG spot price is $87.32.
Spot palladium fell 1.5% Tuesday to $1,488.00 an ounce and is down 0.3% this week. Palladium rose 3.2% last month after tumbling 17% in March and gaining 8.8% in February. Palladium rose 74% last year. The DG spot price is currently up $26.70 an ounce to $1507.00
Spot platinum decreased 0.4% Tuesday to $2,108.80 an ounce but added 2.4% so far this week. It gained 1.3% in April after declining 17% in March and advancing 15% in February. Platinum increased 122% in 2025. The current DG spot price is up $45.20 to $2151.30.
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