Gold drops on the release of this morning’s inflation report, as investors now await the Federal Reserve’s monetary policy outlook later in the day.
February’s wholesale prices rose sharply , according to the Bureau of Labor Statistics. This morning’s producer price index report shows a seasonally adjusted 0.7% increase on the month. Excluding volatile food and energy costs, so-called core PPI increased 0.5%. The forecast was for increases of 0.3% for both measures. Spot gold fell $130 an ounce on the news to $4860.
The central bank is almost unanimously expected to keep interest rates unchanged in its policy announcement Wednesday, but market observers will be closely parsing the central bank’s statement and Chairman Jerome Powell’s remarks following the meeting amid heightened concerns about inflation following the war in Iran.
April gold futures rose $6 Tuesday to settle at $5,008.20 an ounce on Comex but are down 1.1% so far this week. Bullion surged 11% in February after climbing 9.3% in January and rising 2% in December. It rallied 64% last year. The April contract is currently down $146.30 (-2.92%) an ounce to $4861.90 and the DG spot price is $4894.40.
Oil prices are largely holding steady near recent highs because of the war and the ongoing shutdown of the Strait of Hormuz which is reducing global exports by about a fifth. The risk of volatility from the conflict remains throughout the broader market, however.
Currently, most investors don’t expect the Fed to cut interest rates until the second half of the year, the CME FedWatch Tool shows. The central bank kept interest rates unchanged in January after three previous rate cuts. The Fed reduced interest rates for a third consecutive time in December to 3.50% to 3.75%. 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.
Policymakers will be looking at inflation and the labor market for cues.
Data out Friday showed that even before the war in Iran sent oil prices soaring, the core personal expenditures price index, the which excludes volatile food and energy prices, was up 3.1% in January from the year earlier, the most in almost two years. The Fed has a 2% inflation target. If it fails to cut rates in the near term, that would be bearish for gold, making it less attractive as an alternate investment.
Front-month silver declined 0.9% Tuesday to settle at $79.92 an ounce on Comex, and the May contract retreated 1.8% in the first two days of the week. It touched a record above $115 in January. Silver gained 19% last month after advancing 11% in January and climbing 24% in December. It rose 141% last year. The May contract is currently down $3.221 (-4.03%) an ounce to $76.70 and the DG spot price is $77.87.
Spot palladium increased 1.2% Tuesday to $1,630.00 an ounce and is up 2.6% this week. Palladium gained 8.8% in February after advancing 2.4% in January and increasing 11% in December. Palladium gained 74% last year. Currently, the DG spot price is down $67.50 an ounce to $1564.50.
Spot platinum rose 1.2% Tuesday to $2,142.90 an ounce and is up 3.9% this week. It advanced 15% last month after gaining 1.4% in January and surging 22% in December. Platinum increased 122% in 2025. The DG spot price is currently down $76.60 an ounce to $2074.80.
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