Gold fades on hot inflation

Gold fades on hot inflation

Gold fades on this morning’s hot inflation report, but sticks above $2300 an ounce, after hitting an all-time high of $2,365.09 per ounce on Tuesday as investors sought a haven from risks related to inflation and geopolitical uncertainty.

This morning’s Labor Department report showed March’s Consumer Price Index (CPI) rose 0.4% on a monthly basis, hotter than the forecasted 0.3% increase. The stronger-than-expected data contributes to expectations of later and fewer cuts by the Fed. The market has been expecting the Fed to cut rates this year – which would be bullish for gold – but the likely timeline is moving toward the second half of the amid lingering inflation and a strong jobs market. 

Investors, including central banks, are also seeking gold as a hedge against the risk related to the conflicts in the Middle East. 

Front-month gold futures gained 0.5% Tuesday to settle at $2,362.40 an ounce on Comex, as the most-active June contract increased 0.7% in the first two days of the week. Bullion rose 8.9% in March – the biggest monthly rise in more than three years – after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The June contract is currently down $24.50 (-1.04%) an ounce to $2337.90 and the DG spot price is $2330.40.

The Fed has said it closely watches both labor market conditions and inflation when determining monetary policy. U.S. monthly jobs growth surpassed expectations for March in data from the Bureau of Labor Statistics on Friday. The last inflation report was the Fed’s favorite inflation measure, the personal consumption expenditure price index, which came out in line with expectations for February. 

Consumer sentiment data comes out Friday, and a number of Fed officials are scheduled to speak this week. 

About 100% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May. 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 month. Fewer than half of investors are expecting a rate cut in June, with more anticipating a rate cut in July.

Front-month silver futures rose 0.6% Tuesday to settle at $27.98 an ounce on Comex, as the May contract advanced 1.8% in the first two days of the week. Silver gained 8.9% in March after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023. The May contract is currently down $0.149 (-0.53%) an ounce to $27.835 and the DG spot price is $27.73.

Spot palladium increased 2.7% Tuesday to $1,087.50 an ounce and is up 7.2% so far this week. Palladium advanced 7.7% last month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. Currently, the DG spot price is down $28.60 an ounce to $1062.50.

Spot platinum gained 1% Tuesday to $980.00 an ounce and is up 4.9% so far this week. Platinum rose 3.3% last 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 $8.30 an ounce to $967.80.

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