Gold holds the line above $1,700 as consumer spending data for June beats the street, even so the yellow metal looks headed for a fifth weekly loss Friday amid anticipation that the Federal Reserve will remain aggressive in tackling high inflation and the dollar hovered near 20-year highs.
Despite June’s surging inflation, consumer spending remained steady. The Commerce Department reporting retail sales rose slightly more than expected. Advance retail sales increased 1% for the month, better than the Dow Jones estimate of a 0.9% increase.
The U.S. CPI rose 9.1% last month, beating economists’ expectations on surging costs for gasoline, food and rent, among other consumer goods. The report is solidifying expectations that Federal Reserve policymakers will boost interest rates by another 75 basis points later this month to try to rein in the skyrocketing costs of goods and services. The Fed’s favorite inflation measure, released two weeks ago, had shown that prices remained high in May, though there were signs that it had started to ease.
Retail sales, the Empire state manufacturing index, and the University of Michigan consumer sentiment report are due Friday.
August gold futures fell 1.7% Thursday to settle at $1,705.80 an ounce on Comex. The front-month contract tumbled 2.1% in the first four days of the week. Bullion fell 2.2% in June after tumbling 3.3% in May, its worst month since September. The metal retreated 3.5% in 2021. Currently, the August contract is down $3.40 (-0.20%) an ounce to $1,702.40 and the DG spot price is $1,704.30.
Fed Governor Chris Waller said Thursday that he backs the 75-basis-point increase, curbing speculation that the central bank could raise rates by 100 basis points, or 1 percentage point. The next Fed policy decision is due out July 27. Additional meetings this year are scheduled for September, November and December.
“With the CPI data in hand, I support another 75-basis-point increase,” Waller said at a Global Interdependence Center event in Victor, Idaho. But he called the CPI report a “major league disappointment” and said his support for a 75-basis-point move was contingent on data due before the meeting, including retail sales and housing.
The U.S. producer price index jumped 11.3% in June from a year earlier, just shy of the record 11.6% posted in March, data released Thursday showed. Initial jobless claims reached an eight-month high last week, though the labor market remained tight. A positive monthly U.S. jobs report for June seemed to indicate last week that moves to tighten monetary policy hadn’t had a negative impact on the labor market yet, though fears of a recession persist.
High inflation is typically bullish for gold, which is often a haven asset, but the yellow metal has been pressured by the strength in the dollar, which makes gold more expensive for holders of other currencies. The dollar has gotten a boost from recent and anticipated interest rate hikes.
But gold still has some support because of uncertainty over the pandemic and the war in Ukraine.
September silver futures dropped 5.1% Thursday to settle at $18.23 an ounce on Comex, and the front-month contract is down 5.3% so far this week. Silver declined 6.2% in June after falling 6.1% in May. It retreated 12% in 2021. Silver prices are tied to industrial demand. The September contract is currently up $0.200 (+1.10%) an ounce to $18.425 and the DG spot price is $18.49.
Spot palladium lost 2.9% Thursday to $1,946.00 an ounce, sending its four-day drop to 11%. It fell 2.9% in June after losing 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. Currently, the DG spot price has dropped $63.60 an ounce to $1,869.50.
Spot platinum retreated 1.8% Thursday to $851.50 an ounce and is down 5.6% so far this week. It lost 7.2% in June after gaining 2.3% in May and losing 9.4% last year. The DG spot price is currently up $8.60 an ounce to $856.90.
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