Gold edged up this morning, poised for its best week since November, as the dollar and Treasury yields eased and a higher-than-expected U.S. inflation number lured investors to the yellow metal as a hedge.
The U.S. currency was poised for its biggest weekly drop in eight months. That makes gold more attractive to investors who hold other currencies. U.S. 10-year Treasury yields also came off two-year highs reached earlier this week.
February gold futures slipped 0.3% Thursday to settle at $1,821.40 an ounce on Comex. The front-month contract gained 1.3% in the first four days of the week. Gold advanced 2.9% in December — its best month since May — and climbed 4.1% in the fourth quarter. But it dropped 3.5% in 2021. The February contract is currently up $1.90 (+0.10%) to 1,823.30 and the DG spot price is $1,824.20.
While gold is traditionally considered a hedge against inflation, soaring inflation can also prove to be bearish for the yellow metal as it may prompt the Federal Reserve to act sooner rather than later to raise interest rates. That makes the yellow metal a less attractive alternate investment than assets such as Treasurys.
The U.S. consumer price index, a key inflation measure, rose 7% in December from a year earlier, the highest level in 39 years, according to data released Wednesday. High inflation may prompt the Federal Reserve to act sooner rather than later to increase interest rates. Policymakers have indicated that there may be as many as three interest rate hikes in 2022 and a number have signaled that they could begin as soon as March.
The CME FedWatch Tool showed that 85.7% of traders anticipate a rate increase at the March meeting of the Federal Open Market Committee, up from 75.3% a week ago. The Fed committee also meets at the end of January, but few traders anticipate a rate hike then.
Meanwhile, U.S. initial jobless claims rose to the highest level since mid-November last week, according to data released Thursday.
The omicron variant of the coronavirus continued to spread around the world, adding at threat to the economic recovery which could boost gold prices. The World Health Organization said this week that cases are “off the charts” globally.
March silver futures slipped 0.2% Thursday to settle at $23.16 an ounce on Comex. The front-month contract rallied 3.4% in the first four days of the week. Silver gained 2.4% in December and 5.9% in the fourth quarter, though it dropped 12% in 2021. Silver prices are tied to industrial demand. The March contract is down $0.087 (-0.38%) to $23.075 and the DG spot price is $23.09.
Spot palladium fell 0.8% Thursday to $1,906.50 an ounce. It dropped 1.2% in the first four days of the week. Palladium rallied 9.6% in December, but it fell 0.4% in the fourth quarter and 22% in 2021. A global shortage of semiconductor chips means auto production is down, which has pressured demand for the metal. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price is up $5.00 an ounce to $1907.00.
Spot platinum decreased 0.7% Thursday to $981.20 an ounce. It advanced 1.5% in the first four days of the week. The metal gained 2.9% in December and 0.2% in the fourth quarter. It lost 9.4% last year. The DG spot price is up $5.90 an ounce to $988.10.
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