Many investors read the inflation slowdown as a signal the Federal Reserve will curb the pace of future interest rate increases. High rates are typically bearish for gold because they make the yellow metal less attractive than other assets.
Front-month gold futures rose 2.3% Thursday to settle at $1,753.70 an ounce on Comex. The December contract increased 4.6% in the first four days of the week. Bullion fell 1.9% in October, its seventh straight month of declines. The metal is down 4.1% this year. Currently, the December contract is up 12.1 (+0.69%) an ounce to $1765.50 and the DG spot price is $1764.00.
Gold rose on the inflation report along with the broader market. The S&P 500 Index gained 5.5%, while the Dow Jones Industrial Average shot up 1,201.43 points, or 3.7%.
Investors are now betting there’s an 85.4% chance Fed policymakers will raise interest rates by 50 basis points in December, a surge from 56.8% a day earlier. About 14.6% of investors tracked by the CME FedWatch Tool are projecting a 75-basis-point hike, compared with 43.2% a day earlier.
Consumer prices rose 0.4% in October from a month earlier, less than the 0.6% economists had forecast ahead of the data release from the Bureau of Labor Statistics. CPI was up 7.7% from a year earlier. Analysts had projected a 7.9% increase. The Fed’s favorite inflation measure, the personal consumption expenditures price index, increased in September.
The CPI is an economic indicator and is seen as a predictor of Fed actions because the central bank has increased interest rates by 375 basis points this calendar year in an effort to curb 40-year highs in inflation. The central bank raised interest rates by 75 basis points last week to 3.75% to 4%. The move followed increases of 75 basis points each in June, July, September, and November.
Some Fed officials who spoke after the CPI report came out seemed to back a slower pace of interest rate increases. San Francisco Fed President Mary Daly said that “stepping down is an appropriate thing to think about,” but she cautioned that “pausing is not in the discussion, the discussion is stepping down.”
The weekly initial jobless claims report, also released Thursday, showed that the labor market remained robust. However, applications for new unemployment benefits increased slightly more than analysts expected.
Front-month silver futures rose 1.8% Thursday to settle at $21.70 an ounce on Comex. The December contract rallied 4.4% in the first four days of the week. Silver advanced 0.4% in October, its second consecutive monthly increase. It’s down 7.1% this year. The December contract is currently down $0.067 (-0.31%)an ounce to $21.635 and the DG spot price is $21.50.
Spot palladium gained 5.8% Thursday to $1,994.00 an ounce and is up 6.5% so far this week. Palladium declined 15% last month. It’s up 4.1% in 2022. Currently, the DG spot price is solidly up $67.80 an ounce to $2047.00.
Spot platinum increased 5.9% Thursday to $1,051.40 an ounce and is up 8.9% this week. Platinum gained 7.3% in October. It’s up 8.1% this year. The DG spot price is currently down $4.30 an ounce to $1043.70.
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