Gold extended gains and traded around record levels early Friday amid optimism about Federal Reserve interest rate cuts next week after a number of data releases this week showed that the economy may be slowing. Gold has hit record highs in each of the past six months and gained about 24% so far in 2024.
Interest rate cuts are typically considered bullish for gold, which becomes a more attractive alternate investment when rates go down. Additionally, the yellow metal is a historical hedge against uncertainty, whether economic or geopolitical.
U.S. producer prices for August came in in line with estimates in data released Thursday, but the numbers remained consistent with declines in inflation. Wednesday, consumer price index for August showed that annual inflation had slowed to the lowest level since early 2021. The Fed had previously raised interest rates in an effort to combat inflation.
Front-month gold futures rose 1.5% Thursday to settle at $2,580.60 an ounce on Comex. The most-active December contract gained 2.2% in the first four days of the week. Bullion advanced 2.2% in August after increasing 5.7% in July, its biggest monthly gain since March. Gold fell 0.3% in June. The metal rose 13% in 2023. The December contract is currently up $14.30 (+0.55%) $2594.90 and the DG spot price is $2581.60.
Wholesale prices measured by the producer price index rose 0.2% last month, in line with estimates. Excluding volatile food and energy prices, the PPI gained 0.3%, slightly more than the consensus estimate of 0.2%. On a 12-month basis, core PPI rose 3.3%, while headline PPI gained 1.7%.
Consumer prices increased 0.2% last month, in line with estimates, while the year-on-year headline number was 2.5%, the lowest level since February 2021. Core CPI, excluding food and energy prices, increased 0.3% for the month, slightly topping estimates of 0.2%, while the 12-month figure held at 3.2%.
The Fed closely looks at both inflation and labor market data when crafting monetary policy.
U.S. weekly initial jobless claims for last week, which came out Thursday, showed an uptick for the first time in three weeks. That’s consistent with a slowdown in hiring.
Investors tracked by the CME FedWatch Tool unanimously expect the Fed to begin interest rate cuts at the central bank’s next policy meeting ending Sept. 18. About 53% expect a 25 basis point cut, while 47% anticipate a 50 basis point cut. The Fed has kept interest rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
Front-month silver futures increased 4.1% Thursday to $30.11 an ounce on Comex, and the December contract added 6.8% so far this week. Silver gained 0.7% last month after dropping 2.1% in July and falling 2.9% in June. It ticked up 0.2% in 2023. The December contract is currently up $0.673 (+2.24%) an ounce to $30.780 and the DG spot price is $30.68.
Spot palladium rose 3.6% Thursday to $1,062.50 an ounce. It gained 15% in the first four days of the week. Some of the rally came after Russian President Vladimir Putin said Wednesday that Moscow should consider limiting some metals exports to the West. Palladium wasn’t named but was used for short covering, Reuters reported. Palladium increased 3.2% last month after decreasing 4.3% in July and gaining 8.1% in June. Palladium plummeted 38% last year. Currently, the DG spot price is up $21.70 an ounce to $1078.00
Spot platinum gained 2.4% Thursday to $984.70 an ounce. It rallied 6.2% in the first four days of the week. Platinum slid 5.2% in August after losing 2.1% in July and falling 3.7% in June. Platinum dropped 6.8% in 2023. The DG spot price is currently up $21.90 an ounce to $1006.30.
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