Gold rises on Mideast airstrike 

Gold rises on Mideast airstrike

Gold rises early Friday on haven demand driven by the Mideast airstrike. The fears over geopolitical unrest outweighed the latest inflation data.

The yellow metal advanced after the U.S. and U.K. launched strikes on Yemen, heightening concerns that the conflict in Gaza would expand to engulf the region. The strikes followed months of attacks by Houthis on commercial shipping targets in the Red Sea. 

An acceleration in U.S. inflation at the end of last year, however, kept a lid on gold prices because the higher inflation may mean that the Federal Reserve is less likely to begin cutting interest rates early this year. Additional direction will come from producer price index data due out Friday. 

Front-month gold futures fell 0.4% Thursday to settle at $2,019.20 an ounce on Comex, and the February contract slipped 1.5% in the first four days of the week. Bullion gained 0.7% last month after rising 3.2% in November and increasing 6.9% in October. The metal rose 13% in 2023. The February contract is currently up $47.30 (+2.34%) an ounce to $2066.50 and the DG spot price is $2061.50.

The U.S. consumer price index report for December increased 3.4% in the year through December, the most in three months, according to data released Thursday. It also rose more than forecast on a monthly basis. 

So-called core CPI, which excludes volatile food and energy prices, rose 3.9% last month, on a year on year basis, above the estimate for 3.8%. Month on month, the figure cams in at 0.3%, in line with estimates. But when including food and energy prices, headline CPI rose 3.4% year on year, 0.2 percentage point above the outlook. 

The Fed closely watches both inflation and labor market data when determining monetary policy. The Fed has raised interest rates by 5.25 percentage points since March 2022 to curb inflation.

The CPI report “just shows there is more work to do and that work is going to take restrictive monetary policy,” Cleveland Fed President Loretta Mester said on Bloomberg TV. She said she thought a March rate cut would be “too early.”

The CME FedWatch Tool shows that 93.3% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged at 5.25% to 5.50% in January, while 6.7% are expecting a 25 basis point cut, fewer than just a day earlier. But that changes in March, with the central bank widely expected to cut, with another reduction expected in May. 

Front-month silver futures fell 1.6% Thursday to settle at $22.71 an ounce on Comex, and the March contract slid 2.6% in the first four days of the week. Silver dropped 6.1% in December after advancing 12% in November and increasing 2.2% in October. It ticked up 0.2% in 2023. The March contract is currently up $0.895 (+3.94%) an ounce to $23.60 and the DG spot price is $23.48.

Spot palladium lost 0.8% Thursday to $994.00 an ounce and decreased 4.8% in the first four days of the week. Palladium advanced 8.6% in December after losing 9.5% in November and dropping 10% in October. Palladium plummeted 38% last year. Currently, the DG spot price is up $16.00 an ounce to $1007.00.

Spot platinum lost 0.7% Thursday to $919.50 an ounce and tumbled 5.3% so far this week. Platinum rose 8.1% in December after falling 0.7% in November and gaining 3.5% in October. Platinum dropped 6.8% in 2023. The DG spot price is currently up $24.70 an ounce to $943.30.

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