Gold Hits eight-month high

Gold rises after inflation report

Gold hits eight-month high early Wednesday, climbing in conjunction with the broader market, amid increased speculation that the key inflation report due out later this week will show additional softening. The bullion backed off of the high a bit, on profit-taking, but is still in positive territory.

A slowdown in the pace of inflation would be bullish for the precious metal because it might indicate that the Federal Reserve could slow the pace of its series of interest rate hikes. Higher rates are typically bearish for gold because they make it less attractive as an investment asset. The December consumer price index is due out Thursday.

Meanwhile, Fed Chairman Jerome Powell said that the central bank may have to continue to make unpopular decisions to rein in the high cost of goods.

“[R]estoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” Powell said in prepared remarks delivered in Stockholm. “The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.”

Front-month gold futures slipped $1.30 Tuesday to settle at $1,876.50 an ounce on Comex. The February contract advanced 2.8% in the first two days of the week. Bullion gained 3.8% in December after increasing 7.3% in November. It was the first two-month rally since March. The metal fell $2.40 in 2022. The February contract is currently up $4.10 (+0.22%) an ounce to $1880.60 and the DG spot price is $1878.90.

The Fed raised interest rates by 425 basis points in 2022 to 4.25% to 4.5%, the highest level in 15 years. Policymakers’ next rate decision is due Feb. 1. Investors tracked by the CME FedWatch Tool are betting there’s a 79.2% chance the Fed will boost interest rates by just 25 basis points then, with 20.8% odds of another 50 basis point hike. The Fed boosted rates by 50 basis points in December after 75 basis point increases each in June, July, September, and November. 

But Fed Governor Michelle Bowman said Tuesday that she expects the central bank will keep raising interest rates and tightening monetary policy despite some declines in some inflation measures. 

Front-month silver futures fell 0.9% Tuesday to settle at $23.67 an ounce on Comex, and the March contract retreated 1.6% in the first two days of the week. Silver rose 10% in December after increasing 14% in November, its biggest monthly gain since December 2020. It advanced 3% in 2022. The March contract is currently up $0.185 (+0.78%) an ounce to $23.850 and the DG spot price is $23.84.

Spot palladium decreased 0.5% Tuesday to $1,791.50 an ounce and fell 0.8% so far this week. Palladium tumbled 4% in December after gaining 0.3% in November. It lost 5.7% in 2022. Currently, the DG spot price is down $18.80 an ounce to $1778.50.

Spot platinum dropped 1.1% Tuesday to $1,082.90 an ounce, though it gained 1.2% in the first two days of the week. Platinum increased 3.4% last month after rising 11% in November, its best month since February 2021. It surged 10% in 2022. The DG spot price jumped up $24.20 an ounce currently to $1107.70.

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