Gold Rises on Inflation Fears

Gold Rises on Inflation Fears

Gold rises on inflation fears, touching over a one-week high early Monday as the dollar weakened.

The precious metal is a traditional haven against inflation, which last month posted the fastest year-on-year gain since September 1983. U.S. inflation data for January is due Thursday. Another increase could further support — or escalate — the Federal Reserve’s plans to raise interest rates multiple times this year.

Front-month gold futures rose 1.2% last week to settle at $1,807.80 an ounce on Comex after the metal rallied 0.2% Friday. Gold dropped 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is up $5.30 (+0.29%) an ounce to $1,809.40 and the DG spot price is $1,816.00.

Especially concerning for inflation watchers is high oil prices. Benchmark Brent blend crude oil reached its highest level since October 2014 last week. Meanwhile, Treasury yields reached the highest levels in more than two years amid increased speculation about a swift interest rate hike after a positive jobs report out of the U.S. on Friday.

Nonfarm payrolls rose 467,000 in January, more than triple the consensus estimate by analysts of 150,000. The gain came despite the spread of the omicron variant of the coronavirus in January. The report came one day after the U.S. Labor Department reported that weekly initial jobless claims for the prior week came in lower than expected.

While a rate hike is considered bearish for gold, the high inflation behind the move is bullish. So is uncertainty about the state of the pandemic and mounting tensions between Russia and Ukraine.

The CME FedWatch Tool shows that 100% of traders now expect a rate increase at the March meeting, compared with 75.3% a month ago. Money markets are now pricing in multiple rate increases this year.

March silver futures increased 0.8% last week $22.48 an ounce on Comex after the front-month contract advanced 0.5% Friday week. Silver dropped 4.1% in January after gaining 2.4% in December. It fell 12% in 2021. Silver prices are tied to industrial demand. The March contract is currently up $0.400 (+1.78%) an ounce to $22.875 and the DG spot price is $22.91.

Spot palladium fell 3.4% last week to $2,312.50 an ounce after dropping 0.9% Friday. Palladium jumped 24% last month after rallying 9.6% in December. It fell 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price is down $58.70 an ounce to $2,251.00.

Spot platinum gained 1.7% last week to $1,031.60 an ounce, though it dropped 0.7% Friday. The metal rose 5.7% in January after gaining 2.9% in December. It lost 9.4% last year. The DG spot price is currently down $11.20 an ounce to $1020.40.


Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.