Gold poised for a weekly gain after a series of economic reports this week solidified expectations of an interest rate cut by the Federal Reserve in September. The yellow metal sticking close to $2,500 an ounce and an all-time high.
The U.S. consumer price index for July came in at the lowest level since March 2021, bringing inflation closer to the Fed’s 2% target on an annualized basis. The wholesale inflation measure, the producer price index, came out Tuesday and showed inflation rose less than expected last month.
Separately, U.S. initial jobless claims data Thursday showed that initial applications for unemployment benefits fell for a second week last week to the lowest level since early July, while U.S. retail sales for July increased after a drop in June. The retail sales data along with the jobless claims numbers strengthened the dollar, limiting gold’s rally.
Front-month gold futures rose 0.5% Thursday to settle at $2,492.40 an ounce on Comex, and the most-active December contract rallied 0.8% in the first four days of the week. Bullion increased 5.7% in July, its biggest monthly gain since March. Gold fell 0.3% in June and gained 1.9% in May. The metal rose 13% in 2023. The December contract is currently up $34.90 (+1.40%) an ounce to $2527.30 and the DG spot price is $2494.80.
Headline CPI increased 0.2% last month from June, while the 12-month measure reached 2.9% the lowest level in more than three years. “Core” CPI, which excludes volatile food and energy prices, rose 0.2% for the month and 3.2% for the year, meeting expectations. Separately, the PPI rose 0.1% last month. Excluding volatile food and energy prices, core PPI was flat. On a year-on-year basis, headline PPI rose 2.2%, down from a 2.7% reading in June.
The Fed closely watches both inflation and labor market data when determining monetary policy, particularly as concerns have mounted over a possible recession. With inflation gradually declining, policymakers are signaling that they’re giving more weight to jobs data as they attempt to avert an economic slowdown.
Initial jobless claims fell 7,000 to 227,000, below economists’ estimate for 235,000. Labor Department data showed Thursday.
Investors tracked by the CME FedWatch Tool unanimously expect the Federal Reserve to begin interest rate cuts at the central bank’s next policy meeting in September. More than 70% expect a 25 basis point cut, while the rest anticipate a 50 basis point cut. Any reduction would be considered bullish for gold, which becomes a more attractive alternate investment when rates go down. The Fed has kept interest rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
U.S. retail sales rose 1.0% last month after a downwardly revised 0.2% drop in June, according to data from the Commerce Department on Thursday.
Separately, the Gaza Health Department reported Thursday that more than 40,000 Palestinians have been killed Israeli retaliations for Hamas’ Oct. 7 attacks began. The continued standoff as well as the conflict between Russia and Ukraine have kept gold prices elevated amid haven demand. Hostage release and ceasefire talks including Israel and the United States, but not Hamas, resumed Thursday in Qatar, with Egypt and Qatar mediating.
December silver futures rose 4% Thursday to settle at $28.83 an ounce on Comex, while the front-month contract, which rolled from September this week, increased 4.5% in the first four days of the week. Silver dropped 2.1% in July after falling 2.9% in June and surging 14% in May. It ticked up 0.2% in 2023. The September contract is currently down $0.033 (-0.12%) an ounce to $28.385 and the DG spot price is $28.46.
Spot palladium increased 1.3% Thursday to $958.00 an ounce and gained 3.9% so far this week. Palladium decreased 4.3% in July after gaining 8.1% in June and declining 5.1% in May. Palladium plummeted 38% last year. The DG spot price is currently down $2.40 an ounce to $954.50.
Spot platinum rallied 4.1% Thursday to $966.30 an ounce and advanced 3.9% in the first four days of the week. Platinum lost 2.1% in July after falling 3.7% in June and advancing 10% in May. Platinum dropped 6.8% in 2023. The current DG spot price is down $5.80 an ounce to $959.20.
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