Gold drops early Friday on rate hike speculation sparked by hawkish comments from a Federal Reserve official after Thursday’s U.S. inflation report indicated a large interest-rate increase was pending.
St. Louis Fed President James Bullard would like to see interest rates up a total of 1 percentage point by early July, he told Bloomberg in an interview Thursday following a January inflation report that showed the biggest year-on-year jump in about four decades.
“I’d like to see 100 basis points in the bag by July 1,” Bullard, a voter on monetary policy this year, said in a Bloomberg interview Thursday. “I was already more hawkish, but I have pulled up dramatically what I think the committee should do.”
Interest rate increases are typically bearish for gold because they make the yellow metal less attractive as an alternate investment. The yellow metal is also a historic hedge against inflation, so reducing inflation would also be bearish for gold.
Front-month gold futures rose 80 cents Thursday to settle at $1,837.40 an ounce on Comex. The metal is gained 1.6% in the first four days of week. Gold dropped 1.8% in January, its worst month since September. It retreated 3.5% in 2021. Currently, the April contract is down $7.40 (-0.40%) an ounce to $1,830.00 and the DG spot price is $1,830.50.
Goldman Sachs economists are now forecasting that the Fed will raise interest rates seven times this year to tackle soaring inflation. The bank had previously forecast five increases in 2022.
The consumer price index for January showed a 7.5% annual rise, the highest monthly increase since 1982. The data came out Thursday.
Benchmark U.S. 10-year Treasury yields hovered near the highest level in more than two years, further pressuring gold prices.
But the floor under the precious metal held as Russia and Ukraine failed to reach a breakthrough in talks intended to defuse escalating tensions between the two countries, and fears of the coronavirus pandemic persisted. Both propped up gold as a hedge against uncertainty.
March silver futures increased 0.8% Thursday to $23.52 an ounce on Comex. The front-month contract advanced 4.7% in the first four days of the week. Silver dropped 4.1% in January after gaining 2.4% in December. It fell 12% in 2021. Silver prices are tied to industrial demand. The March contract is currently down $0.482 (-2.05%) an ounce to $23.040 and the DG spot price is $23.11.
Spot palladium fell 0.6% Thursday to $2,289.00 an ounce. It’s down 1% so far this week. Palladium jumped 24% last month after rallying 9.6% in December. It fell 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price has dropped $77.80 an ounce to $2,206.50.
Spot platinum gained 0.1% Thursday to $1,047.30 an ounce, and it’s up 1.5% so far this week. The metal rose 5.7% in January after gaining 2.9% in December. It lost 9.4% last year. The DG spot price is down currently, off $23.80 an ounce to $1,026.90.
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