Gold poised for weekly gain

Gold poised for weekly gain

Gold poised for its second consecutive weekly gain early Friday after a key inflation report this week renewed optimism about a Federal Reserve interest rate cut this year. The bullish turn provides support for silver and platinum, which are up 5.6% and 6.3%, respectively, for the week. The bullish charts sent DG spot gold back up over $2400 an ounce and DG spot silver over $30 an ounce.

The consumer price index report for April, which came out Wednesday, showed that inflation eased but remained well above the Fed’s 2% target. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to rein in inflation. It was widely expected to start rate cuts earlier this year, but the timeline has been stymied by persistently high inflation.

Gold initially rallied after the CPI report Wednesday but retreated Thursday as the stock market took off and the dollar strengthened. The yellow metal was slightly down early Friday. The prospect of lower interest rates is typically bullish for gold, which becomes a more attractive alternate investment. 

Front-month gold futures fell 0.4% Thursday to settle at $2,385.50 an ounce on Comex, but the most-active June contract rose 0.4% in the first four days of the week. Bullion gained 2.9% in April after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. The June contract is currently up $21.3 (+0.89%) an ounce to $2406.80 and the DG spot price is $2398.60.

The Dow Jones Industrial Average rallied to an all-time record high above 40,000 for the first time on Thursday. 

The CPI gained 0.3% in April from March, according to data from the Bureau of Labor Statistics, slightly below economists’ estimates for 0.4%. On a 12-month basis, it rose 3.4%, in line with expectations. So-called core CPI, the costs of goods excluding volatile food and energy prices, was 3.6%, the lowest reading since April 2021. 

The day before, the U.S. producer price index came in higher than economists projected

New York Fed President John Williams told Reuters on Wednesday that the softer inflation data is encouraging but isn’t enough to call for a rate cut anytime soon. 

The April CPI “is kind of a positive development after a few months where the data were disappointing,” he said. “The overall trend looks reasonably good” for a gradual slowdown in inflationary pressures, he said. 

Williams, Cleveland Fed President Loretta Mester and Richmond Fed President Thomas Barkin all signaled in separate remarks Thursday that it may taken longer for inflation to reach the Fed’s 2% target. 

About 91.1% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 8.9% expect a 25 basis point cut. More than 65% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting. 

July silver futures rose 0.5% Thursday to settle at $29.88 an ounce on Comex, and the front-month contract advanced 4.8% in the first four days of the week. Silver rose 7% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract is currently up $0.859 (+2.88%) an ounce to $30.735 and the DG spot price is $30.32.

Spot palladium fell 1.8% Thursday to $1,004.00 an ounce but has increased 1.6% so far this week. It reached a one-year high in intraday trading Thursday.. Palladium declined 5.9% last month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the DG spot price is down $6.40 an ounce to $999.50.

Spot platinum lost 0.2% Thursday to $1,065.50 an ounce but has gained 6.3% so far this week. Platinum gained 3.1% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The DG spot price is currently up $6.80 an ounce to $1074.00.

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