Gold Rises on Cooler Inflation

Gold Rises on Cooler Inflation

Gold rises on cooler inflation, briefly jumping the $1,800 an ounce line as the Consumer Price Index stays under the forecast level.

Consumers paid 8.5% more in July from a year ago, however, that’s lower than the expected 8.7% increase leading investors to speculate the Fed might be less aggressive with its next rate hike. The slowing pace from the previous month due largely to a drop in gasoline prices which fell 7.7%.

Higher interest rates are bearish for gold, so signs that inflation is declining may cause the yellow metal to rally.

Front-month gold futures rose 0.4% Tuesday to settle at $1,812.30 an ounce on Comex, and the December contract increased 1.2% in the first two days of the week. Bullion dropped 1.4% in July after falling 2.2% in June and 3.3% in May, its worst month since September. The metal retreated 3.5% in 2021. Currently, the December contract is up $0.20 (+0.01%) an ounce to $1,812.50 an ounce and the DG spot price is $1795.00.

Fed policymakers’ next meeting is in September, and the July CPI report is one of several key economic indicators that the central bank is likely to consider.

The Fed raised rates by 75 basis points in June and July and was expected to increase by 50 basis points in September until the June personal consumption expenditures index came out at the end of July and spurred speculation that it could be another 75 basis-point move.

The PCE, the Fed’s favorite inflation measure, in June reached the highest level since January 1982 —  6.8%. The June CPI report showed an increase of 9.1%.

High inflation has also stoked fears that the U.S. may be entering or in a recession. That has boosted gold as a haven asset. Tensions between the U.S. and China over Taiwan, the ongoing pandemic and the war in Ukraine have also caused uncertainty that has been bullish for the precious metal.

But strong U.S. employment data for July, released last week, dampened speculation about a recession, causing the dollar and U.S. Treasury yields to rise and bringing some pressure to bear on gold.

September silver futures slipped 0.6% Tuesday to settle at $20.48 an ounce on Comex, though the front-month contract increased 3.2% in the first two days of the week. Silver slipped 0.8% in July after declining 6.2% in June and falling 6.1% in May. It retreated 12% in 2021. Silver prices are tied to industrial demand. The September contract is currently up $0.113 (+0.55%) an ounce to $20.595 and the DG spot price is $20.58.

Spot palladium decreased 1.1% Tuesday to $2,247.00, though it rallied 4.1% in the first two days of the week. Palladium rose 9.9% in July after losing 2.9% in June and 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. Currently, the DG spot price has risen $12.20 an ounce to $2256.00.

Spot platinum fell 1.1% Tuesday to $942.70 an ounce, though it’s up 0.4% so far this week. Platinum retreated 0.3% in July after losing 7.2% in June. It dropped 9.4% last year. The DG spot price is currently up $0.70 an ounce to $943.70.


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