Gold heads for second weekly gain as the dollar weakens. The yellow metal solidified its position above $1,850 despite this morning’s inflation report that indicates prices may have peaked.
The core personal consumption expenditures price index rose 4.9% in April from a year ago. While still elevated, it shows a slowing from March’s 5.2% per the Commerce Department. This number excludes the volatile food and energy prices that have been the major drivers of inflation’s near 40-year peak. The PCE is the Federal Reserve’s preferred inflation gauge.
The U.S. dollar index headed for its second weekly decline, making gold more affordable to holders of other currencies. The dollar decrease came as the minutes of the last meeting of Fed policymakers indicated that the market has likely priced in future actions on monetary policy.
August gold futures rose $1.40 Thursday to settle at $1,853.90 an ounce on Comex. The most-active contract advanced 0.3% in the first four days of the week. Gold is down 3% so far this month after retreating 2.2% in April, its worst month since September. It dropped 3.5% in 2021. The August contract is up $11.00 (+0.59%) currently to $1,864.90 and the DG spot price is $1,860.70.
Fed policymakers indicated that half-percentage-point interest rate increases were likely appropriate for their next two meetings, minutes of the last gathering in early May showed Wednesday, though some attendees indicated that a pause might be possible. Fed officials also expressed strong concern about the effect of 40-year highs in inflation on U.S. consumers.
Most investors already expected the Fed to raise rates another half percentage point at policymakers’ next scheduled meeting in June, according to the CME’s FedWatch Tool. The central bank increased benchmark rates by half a percentage point earlier this month, in the second rate hike of 2022 and the largest in 22 years. Rate increases are typically considered bearish for gold.
In other economic news, the U.S. economy shrank by 1.5% in the first quarter, GDP data released Thursday showed. But consumers and businesses kept up robust spending levels. Weekly initial jobless claims data fell more than analyst expected, as the labor market remained tight.
Gold also got some support from ongoing uncertainty around the pandemic, the war in Ukraine and disrupted global supply chains, particularly for commodities.
Front-month silver futures gained 0.4% Thursday to settle at $21.97 an ounce on Comex, and the July futures gained 1.3% in the first four days of the week. Silver is down 4.9% so far this month after losing 8.2% in April, its worst monthly performance since September. It fell 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently up $0.345 (+1.57%) an ounce to $22.310 and the DG spot price is $22.36.
Spot palladium increased 0.4% Thursday to $2,039.00 an ounce, and it’s up 2.5% so far this week. The metal is down 13% so far this month after advancing 2.6% in April. It retreated 22% in 2021. The current DG spot price is up $52.80 an ounce to $2,084.50.
Spot platinum gained 0.8% Thursday to $957.20 an ounce, though it fell 0.2% in the first four days of the week. The metal is down 60 cents so far this month after dropping 4.4% in April. It lost 9.4% last year. The DG spot price for platinum is currently up $7.30 an ounce to $964.70.
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