Gold regains after inflation report

Gold regains after inflation report

Gold regains some ground early Wednesday, firming up after dropping more than $20 an ounce on Tuesday’s inflation report for February that came in hotter than expected, pressuring gold prices from near a record high.

The core U.S. consumer price index, the cost of goods excluding volatile food and energy prices, came in above forecasts for the second consecutive month, potentially delaying the Federal Reserve’s plans to cut interest rates. Continued high interest rates would be considered bearish for the yellow metal, making it a less attractive asset for investors.

In physical market news, India allowed its central bank to import gold without paying levies, the government said in a notification late Tuesday, which was reported by Reuters. The country is the world’s second-largest gold consumer, and the Reserve Bank of India held 800.79 metric tons of gold as of September. 

Front-month gold futures fell 1% Tuesday to settle at $2,166.10 an ounce on Comex, and the most-active April contract is down 0.9% so far this week. Bullion dropped 0.6% in February after declining 0.2% in January and gaining 0.7% in December. The metal rose 13% in 2023. The April contract is currently up $2.5 (+0.12%) an ounce to $2168.60 and the DG spot price is $2164.40.

Gold prices dropped the most in a month Tuesday as the dollar and Treasury yields firmed on the inflation report. But gold remained well above the $2,100-an-ounce threshold, supported by haven demand, particularly because of the wars in Ukraine and Gaza. 

Core CPI increased 0.4% last month, the same amount as in January, according to data released Tuesday from the U.S. Bureau of Labor Statistics. Top-line CPI was also up 0.4% from January. On an annual basis, though, core CPI rose 3.8%, the slowest pace since May 2021. Headline CPI was up 3.2%. 

The Fed closely tracks both inflation and labor market data when determining monetary policy. The monthly U.S. jobs report came in Friday and showed the country added a greater-than-expected 275,000 jobs in February, though the unemployment rate went up. 

About 99% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged this month, while 1% expect a 25 basis point cut. Most investors tracked by the tool also anticipate the Fed will hold rates steady at the following policy meeting in May. Most are now looking to June for a rate cut. 

The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its last meeting. 

The U.S. producer price index comes out Thursday, along with weekly initial jobless claims. The two reports will provide further insight on inflation and the labor market. U.S. retail sales also come out Thursday, followed by industrial production and consumer sentiment data Friday. 

Front-month silver futures fell 1.3% Tuesday to settle at $24.39 an ounce on Comex, and the May contract slipped 0.6% in the first two days of the week. Silver lost 1.2% in February after falling 3.8% in January and dropping 6.1% in December. It ticked up 0.2% in 2023. The May contract is currently up $0.126 (+0.52%) an ounce to $24.520 and the DG spot price is $24.31.

Spot palladium increased 0.8% Tuesday to $1,052.00 an ounce and is up 2.4% so far this week. Palladium fell 4.6% in February after tumbling 11% in January and advancing 8.6% in December. Palladium plummeted 38% last year. Currently, the DG spot price is up $26.90 an ounce to $1081.50.

Spot platinum retreated 1.7% Tuesday to $929.80 an ounce but is up 1.5% so far this week. Platinum decreased 4.9% in February after falling 8% in January and rising 8.1% in December. Platinum dropped 6.8% in 2023. The DG spot price is currently up $10.70 an ounce to $940.90.

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