Gold Inches Up From two-month low

Gold Inches Up From two-month low

Gold inches up from the two-month low it hit early Monday. That low was sparked by a key inflation report released Friday heightened anticipation of additional interest rate increases for some time. The yellow metal’s moves follow this morning’s durable goods data.

Durable goods were decidedly mixed. The overall number dropped 4.5% in January from the prior month per the Commerce Department on Monday. Economists had expected durable goods orders to tumble by 4.0 percent. However, the drop is being driven by the transportation sector which saw a 13.3 percent dive in January. When you pull out transportation equipment orders, core durable goods orders actually climbed by 0.7 percent in January after falling by a revised 0.4 percent in December.

On Friday, the U.S. personal consumption expenditures price index, the Federal Reserve’s favorite inflation measure, showed an unexpected acceleration for January as consumer spending surged, adding to pressure for the Fed to keep raising rates to rein in inflation. Interest rate increases are considered bearish for gold because they make the metal less attractive as an alternate investment. 

Front-month gold futures fell 1.8% last week to settle at $1,817.10 an ounce on Comex after the April contract fell 0.5% Friday. Bullion has dropped 6.6% so far this month and is poised to end 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 $4.8 (+0.26%) an ounce to $1821.90 and the DG spot price is $1818.00.

The PCE index rose 5.4% last month from a year earlier, as the core figure advanced 4.7%. Both figures reversed several months of declines. Separately, U.S. consumer spending increased by the most in almost two years last month, data from the Commerce Department showed Friday.

The Fed has 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. 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. 

“I see that we’re going to have to bring interest rates above 5%,” Cleveland Fed President Loretta Mester said Friday on CNBC after the reports came out. “We’ll figure out how much above. That’s going to depend on how the economy evolves over time. But I do think we have o be somewhat above 5% and hold there for a time in order to get inflation on a sustainable downward path to 2%.” 

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, more have been anticipating a larger hike. The tool shows 78.2% of investors expecting a 25-basis-point hike, with the remaining 21.8% betting on the Fed to raise rates by 50 basis points. A week ago, 81.9% of those tracked were expecting a 25 basis point increase. 

Key first-of-the month manufacturing data from the U.S. and other major economies will come Wednesday. Also closely watched by investors will be the consumer confidence report Tuesday and weekly initial jobless claims Thursday.

Silver May futures dropped 4.2% last week to settle at $20.94 an ounce on Comex after the front-month contract lost 2.3% Friday. Silver is down 12% this month after falling 0.9% in January and rising 10% in December. It advanced 3% in 2022. Currently, the May contract is down $0.146 (-0.70%) an ounce to $20.790 and the DG spot price is $20.74.

Spot palladium tumbled 6.4% last week to $1,427.00 an ounce after falling 1.9% Friday. Palladium has plummeted 15% so far this month after dropping 7.5% in January and retreating 4% in December. It lost 5.7% in 2022. The current DG spot price is up $58.10 an ounce to $1466.50.

Spot platinum decreased 1.1% last week to $917.30 an ounce after decreasing 3.5% Friday. Platinum is down 10% in February after retreating 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. The DG spot price is moving up, currently by $32.20 an ounce, to $949.10.

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