Gold tipped back up early Friday but was poised for a weekly drop as investor inflation, in part because of the recent oil price spike on the war in Iran, reduced expectations that the Federal Reserve will cut interest rates this year.
U.S. economic data released this morning by the Commerce Department shows slower than expected growth for 2025’s final quarter. The GDP rose at a seasonally and inflation-adjusted annual rate of just 0.7% in the fourth quarter, that’s a steep drop from the previous estimate of 1.4% and below the forecasted 1.5%.
On the inflation side, readings for January were mostly in line with estimates, though they showed price increases running well ahead of where the Federal Reserve would like. The personal consumption expenditures price index, the Fed’s primary forecasting tool for inflation, posted a seasonally adjusted gain of 0.3% for the month, putting the annual rate at 2.8%. Economists surveyed by Dow Jones had been looking for respective readings of 0.3% and 2.9%. Stripping out volatile food and energy costs, core PCE inflation rose 0.4% in January and 3.1% on a 12-month basis. Fed officials focus more closely on the core reading as a better indication of longer-run trends. These numbers do not include any impacts from the Iran war.
April gold futures fell 1% Thursday to settle at $5,125.80 an ounce on Comex and are down 0.6% so far this week. Bullion surged 11% in February after climbing 9.3% in January and rising 2% in December. It rallied 64% last year.
While gold is a traditional hedge against inflation in times of geopolitical and economic uncertainty, it has taken a back seat to other assets during the current conflict, particularly as oil traders are forced to put up more money to cover their trades.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, is due out Friday with January data. Friday will also bring data on fourth-quarter GDP and January personal spending as well as March preliminary consumer sentiment.
The release of the consumer price index for February on Wednesday showed that inflation held steady last month but remained above the Fed’s 2% target before the war.
Even before the Iran war drove oil prices higher, many market watchers were concerned about economic weakness, particularly that inflation was edging up that might keep the Fed from implementing interest rate cuts this year – or at least very many of them. High interest rates are considered bearish for precious metals because they make them less attractive investments in comparison to other assets.
The Fed is set to meet on monetary policy late this month and policymakers will be looking at inflation and the labor market for cues. Currently, most investors don’t expect the Fed to cut rates until December, the CME tool shows, the CME FedWatch Tool shows.
The central bank kept interest rates unchanged in January after three previous rate cuts. The Fed reduced interest rates for a third consecutive time in December to 3.50% to 3.75%. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts in 2024.
Front-month silver declined 0.5% Thursday to settle at $85.11 an ounce on Comex, though the May contract gained 1% in the first four days of the week. It touched a record above $115 in January. Silver gained 19% last month after advancing 11% in January and climbing 24% in December. It rose 141% last year.
Spot palladium decreased 0.4% Thursday to $1,638.00 an ounce and slid 1.8% so far this week. Palladium gained 8.8% in February after advancing 2.4% in January and increasing 11% in December. Palladium gained 74% last year.
Spot platinum retreated 1.9% Thursday to $2,155.80 an ounce but gained 0.3% in the first four days of the week. It advanced 15% last month after gaining 1.4% in January and surging 22% in December. Platinum increased 122% in 2025.
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