Gold Regained Ground on Key data

Gold Regained Ground on Key data

Gold regained ground on key inflation data that came in at low, yet expected level. While the yellow metal reclaimed the turf above the $1950 an ounce level, it looks headed for its biggest weekly decline in five weeks, after the dollar and Treasury yields rose on strong economic reports.

Inflation showed further signs of cooling in June per the Commerce Department. The personal consumption expenditures price index, the Federal Reserve’s favorite inflation measure, increased just 0.2% from the previous month, excluding food and energy. The is the lowest annual rate in two-years, but is in line with the Dow Jones estimate.

Front-month gold futures fell 1.2% Thursday to settle at $1,985.20 an ounce on Comex, and the December contract slipped 1% in the first four days of the week. Bullion is up 2.9% so far this month after dropping 2.7% last month and retreating 0.9% in May. The metal gained 5.7% in the first half of the year after falling $2.40 in 2022. The December contract is currently up $7.6 (+0.38%) an ounce to $1992.80 and the DG spot price is $1958.80.

U.S. GDP grew at a 2.4% annual rate in the second quarter, adjusted for inflation, according to data from the Commerce Department on Thursday. That’s up from 2% in the first quarter of the year. The report helped support the dollar and Treasury yields. When they strengthen, it makes gold less attractive to investors, particularly holders of other currencies. 

The GDP report also signaled that the economy is strong and possibly resistant to another interest rate hike from the Fed, which raised rates by another 25 basis points Wednesday. Investors have speculated it would be the last rate hike for a while – and a pause in interest rates hikes would be considered bullish for gold because the metal becomes less attractive to investors when rates go up. But Fed Chairman Jerome Powell left open the possibility of additional hikes. 

But about 80% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in September at 5.25% to 5.50%. Just 20% expect it to keep rates unchanged. Most investors tracked by the tool are betting that it will then hold at that rate at the three remaining meetings this year. 

The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to rein in inflation. The European Central Bank also raised rates again Thursday – for the ninth time. The Bank of Japan maintained ultra-low interest rates Friday but possibly signaled an eventual move away from them with a policy change. 

September silver futures dropped 2.4% Thursday to settle at $24.37 an ounce on Comex. The most-active contract lost 2% in the first four days of the week. Silver is up 5.9% this month after dropping 2.4% in June and decreasing 6.5% in May. It retreated 4.2% in the first half of the year after rising 3% in 2022. The September contract is currenly down $0.027 (-0.11%) an ounce to $24.340 and the DG spot price is $24.27.

Spot palladium decreased 1.6% Thursday to $1,261.00 an ounce and is down 3.9% so far this week. Palladium is up  0.7% this month after falling 9.5% in June and tumbling 9.3% in May. Palladium plummeted 31% in the first half of the year after losing 5.7% in 2022. Currently, the DG spot price is down $4.60 an ounce to $1257.00.

Spot platinum fell 2.7% Thursday to $942.70 an ounce and is down 2.9% this week. Platinum is up 3.5% this month after falling 9.3% in June and retreating 7.4% in May. Platinum dropped 15% in the first half of the year after surging 10% in 2022. The DG spot price is currently down $6.70 an ounce to $937.70.

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