Gold gains ground on weaker dollar. The currency slumped on surprising data out of China that sparked optimism for a Chinese economic recovery. The bullion’s boost from the dollar was balanced by speculation about prolonged higher interest rate increases.
The yellow metal posted its worst month since June 2021 in February after a series of economic reports painted a picture of a strong and robust economy that was still dealing with soaring interest rates. Both set the stage for the Federal Reserve to continue hiking interest rates beyond 5%. Interest rate increases are considered bearish for gold because they make the metal less attractive as an alternate investment.
Investors were awaiting key first-of-the month manufacturing data from the U.S. and other major economies Wednesday for further direction.
Economic data out of China on Wednesday also pointed to a robust economy. The manufacturing purchasing managers’ index rose in February to the highest level since April 2012, according to the National Bureau of Statistics.
Front-month gold futures rose 0.7% Tuesday to settle at $1,836.70 an ounce on Comex. The April contract advanced 1.1% in the first two days of the week. Bullion dropped 5.6% last month, ending the longest consecutive monthly rally since July 2020. It increased 6.5% in January and gained 3.8% in December. The metal fell $2.40 in 2022. The April contract is currently up $11.2 (+0.61%) an ounce to $1847.90 and the DG spot price is $1843.00.
U.S. consumer confidence slumped in February, according to data released Tuesday, amid fears of a recession if the Fed continues to raise rates. The consumer confidence index fell to 102.9 last month from a revised 106 for January, data from the Conference Board showed. Economists had anticipated the figure would reach 108.5.
Last week, data showed that the Federal Reserve’s favorite inflation measure, the U.S. personal consumption expenditures price index, unexpectedly accelerated in January.
The Fed had previously signaled it was likely to raise interest rates to 5%, and possibly beyond, over the coming months to continue to rein in high inflation, and the PCE report gave more support to those expectations. The Fed raised rates by 25 basis points Feb. 1 to 4.50% to 4.75%. The move followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November.
While most investors tracked by the CME FedWatch Tool are still betting that the Fed will boost rates by another 25 basis points in March 16, more have been anticipating a larger hike. The tool shows 76.7% of investors expecting a 25-basis-point hike, with the remaining 23.3% betting on the Fed to raise rates by 50 basis points. A month ago, 84.2% of those tracked were expecting a 25 basis point increase.
Silver May futures increased 1.3% Tuesday to settle at $21.07 an ounce on Comex. The front-month contract gained 0.6% in the first two days of the week. Silver retreated 12% this month after falling 0.9% in January and rising 10% in December. It advanced 3% in 2022. The May contract is currently up $0.009 (+0.04%) an ounce to $21.080 and the DG spot price is $1842.90.
Spot palladium dropped 1.1% Tuesday to $1,440.00 an ounce and is up 0.9% so far this week. Palladium plummeted 14% in February after dropping 7.5% in January and retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is up $9.10 an ounce to $1455.00
Spot platinum gained 1.5% Tuesday to $964.00 an ounce. It rose 5.1% the first two days of the week. Platinum retreated 5.9% in February after falling 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. The DG spot price is currently up $11.60 an ounce to $973.10.
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