Gold still poised for best week since April, although it has slightly backed off from overnight highs. The bullion is getting support from data showing inflation has slowed making it less likely that the Federal Reserve will continue its aggressive monetary policy.
U.S. wholesale prices rose less than expected in June, according to a report Thursday from the Labor Department. The data came out a day after the consumer price index indicated that the economy shifted into disinflation.
Fed policymakers have said they closely track reports on both the labor market and inflation. Though most investors still expect another rate hike next month, there’s increasing speculation that the rate increases to stem inflation may be winding to a close.
August gold futures rose 0.1% Thursday to settle at $1,963.80 an ounce on Comex, and the front-month contract rallied 1.6% in the first four days of the week. Bullion dropped 2.7% last month after retreating 0.9% in May and increasing 0.6% in April. The metal gained 5.7% in the first half of the year after falling $2.40 in 2022. The August contract is currently down $3.70 (-0.19%) an ounce to $1960.10 and the DG spot price is $1957.20.
The producer price index rose 0.1% last month, less than the 0.2% expected by economists. It also increased 0.1% when excluding food, energy and trade services. The consumer price index increased 0.3% year on year in June, the smallest gain since 2021. On a monthly basis, the CPI’s 0.2% gain was the smallest since August 2021.
While gold is a traditional hedge against inflation, it’s taken a backseat in the current cycle to assets like the dollar and Treasurys. The U.S. currency hit a 15-month low after the inflation reports, bolstering gold, which becomes more attractive to investors holding other currencies.
About 94.9% of investors tracked by the CME FedWatch Tool are still betting that the Fed will raise rates by 25 basis points at its July monetary policy meeting, while 5.1% expect it to keep rates unchanged. The Fed has increased rates by 25 basis points three times this year following hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022 and smaller increases in March and May of last year. The rate hikes have totaled 5 percentage points since March 2022.
The Fed held rates unchanged last month for the first time after 10 consecutive increases. The Fed left its benchmark federal funds rate at 5.00% to 5.25% in June.
September silver futures rallied 2.6% Thursday to $24.95 an ounce on Comex, and the most-active contract surged 7.1% so far this week. Silver dropped 2.4% in June after decreasing 6.5% in May and gaining 4.4% in April. It retreated 4.2% in the first half of the year after rising 3% in 2022. The September contract is currently up $0.066 (+0.26%) an ounce to $25.015 and the DG spot price is $24.97.
Spot palladium rose 1.4% Thursday to $1,320.00 an ounce and is up 3.8% in the first four days of the week. Palladium fell 9.5% in June after tumbling 9.3% in May and rising 2% in April. Palladium plummeted 31% in the first half of the year after losing 5.7% in 2022. Currently, the DG spot price is down $28.20 an ounce to $1288.50.
Spot platinum advanced 2.5% Thursday to $982.80 an ounce and has gained 6.7% so far this week. Platinum fell 9.3% in June after retreating 7.4% in May and adding 8.5% in April. Platinum dropped 15% in the first half of the year after surging 10% in 2022. The DG spot price is down $1.20 an ounce to $978.20.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.