Gold edges up ahead of inflation data

Gold edges up ahead of inflation data

Gold edges up sticking near record highs early Wednesday as investors awaited key inflation data due out Friday for further indications on the timetable of the Federal Reserve’s anticipated rate cuts.

The Fed’s favorite inflation measure, the personal consumption expenditure price index, for further direction. Economists estimate that the PCE index rose 0.3% last month, which would keep the annual pace at 2.8%, above the Fed’s 2% annual target.

Most investors are now expecting rate cuts to begin this summer. Gold touched a record high above $2,200 an ounce last week after Fed policymakers reiterated last week that the central bank expects to cut interest rates three times this year. Lower interest rates would be considered bullish for the yellow metal, making it a more attractive asset for investors. 

Goldman Sachs forecast this week that the precious metal is poised to reach $2,300 an ounce by year’s end. In addition to rate cut speculation, gold has gotten a boost from geopolitical unrest, including the wars in Ukraine and Gaza. But strength in the dollar has capped some of the current rally. 

Front-month gold futures rose $1 Tuesday to settle at $2,199.20 an ounce on Comex. The most-active June contract has gained 0.8% so far this week. Bullion is up 7% so far this month after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The June contract is currently up $11.70 (+0.53%) an ounce to $2210.90 and the DG spot price is $2192.80.

Comex electronic trading won’t settle Friday because many financial markets are closed in honor of the Good Friday holiday. While the PCE report comes out Friday morning in the U.S., investors aren’t likely to fully digest the information until markets reopen next week. 

Earlier this month, the core U.S. consumer price index, the cost of goods excluding volatile food and energy prices, came in above forecasts for the second consecutive month in February. The Fed closely tracks both inflation and labor market data when determining monetary policy. 

U.S. weekly initial jobless claims come out Thursday, and the end of next week will bring the widely anticipated U.S. monthly jobs report for March. Fed Chairman Jerome Powell said after the Fed’s policy announcement last week that a surprise increase in unemployment could spur the Fed to cut rates. 

U.S. University of Michigan consumer sentiment data and U.S. GDP data are also due out this Thursday. 

About 91% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 9% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last week. Most investors are expecting a rate cut in June.

Front-month silver futures fell 1.1% Tuesday to settle at $24.62 an ounce on Comex, and the May contract retreated 0.9% in the first two days of the week. Silver has advanced 7.6% so far this month after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023. The May contract is currently up $0.147 (+0.60%) an ounce to $24.770 and the DG spot price is $24.61.

Spot palladium decreased 1% Tuesday to $1,006.50 an ounce but is up 0.5% so far this week. Palladium is up 5.5% this month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. Currently, the DG spot price is down $23.10 an ounce to $986.00.

Spot platinum edged up 0.1% Tuesday to $912.10 an ounce and has advanced 1.3% in the first two days of the week. Platinum is up 3% this month after decreasing 4.9% in February and falling 8% in January. Platinum dropped 6.8% in 2023. The DG spot price is currently down $14.90 an ounce to $899.80.

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