Gold Eases on unexpected inflation

Gold Eases on unexpected inflation

Gold eases on unexpected rise in this morning’s inflation numbers. The yellow metal had ticked up on the softer dollar which weakened early Friday as investors await next week’s Federal Reserve rate decision. Gold still hovering around the $1,800-an-ounce threshold.

The producer price index (PPI) increased 0.3% for November and 7.4% from a year ago, the Labor Department reported Friday. The PPI is a measure of what companies get for their products in the pipeline. Economists surveyed by Dow Jones had been looking for a 0.2% gain. The food index was pushed up 3.3% in November, led by a 38% surge in wholesale vegetable prices. The food spike offset the 3.3% decline in energy costs.

The Fed closely watches reports on inflation and the U.S. labor market when it makes monetary policy decisions because it’s attempting to rein in 40-year highs in inflation through a series of interest rate hikes. The November consumer price index will be released on Dec. 13, and Fed policymakers meet on Dec. 13 and Dec. 14, with the rate decision due on Dec. 14. 

High interest rates are typically bearish for gold, though the yellow metal has traditionally served as a hedge against inflation. The University of Michigan consumer sentiment index is also coming out Friday and will be closely watched by investors. 

Front-month gold futures rose 0.2% Thursday to settle at $1,801.50 an ounce on Comex, though the February contract dropped 0.5% in the first four days of the week. Bullion gained 7.3% in November, its first monthly rally since March. The metal is down 1.5% this year. The February contract is currently up $8.6 (+0.48%) an ounce to $1810.10 and the DG spot price is $1799.90.

The most recent inflation report, released last week,  indicated that the Fed’s favorite inflation measure, the personal consumption expenditures price index, posted its second-smallest increase this year in October. Meanwhile, U.S. jobs growth was much better than economists forecasted in November.

U.S. weekly initial jobless claims for last week showed Thursday that applications for new unemployment benefits rose to a 10-month high, but the labor market remained tight.

The Fed has raised rates by 375 basis points this calendar year to tame 40-year highs in inflation. The rate hikes were 75 basis points each in June, July, September, and November. Investors are betting there’s a 79.4% chance the Fed will raise interest rates by 50 basis points in December, compared with 56.8% anticipating that size move a month ago. About 20.6% of investors tracked by the CME FedWatch Tool are projecting another 75-basis-point hike, compared with 43.2% a month ago. 

Front-month silver futures rose 1.4% Thursday to settle at $23.25 an ounce on Comex, and the March contract slipped 0.4 cents in the first four days of the week. Silver increased 14% in November, its biggest monthly gain since December 2020. It’s down 0.5% this year. The March contract is currently up $0.289 (+1.24%) an ounce to $23.535 and the DG spot price is $23.36.

Spot palladium gained 3.9% Thursday to $1,950.00 an ounce and is up 1.3% so far this week. Palladium rose 0.3% last month after declining 15% in October. It’s up 1.8% in 2022. The DG spot price is currently up $6.20 an ounce to $1952.00.

Spot platinum increased 0.3% Thursday to $1,017.40 an ounce, and it dropped 0.8% in the first four days of the week. Platinum gained 11% in November, its best month since February 2021. It’s up 4.6% this year. Currently, the DG spot price ticked up $1.10 an ounce to $1016.70.

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