Gold rises on recession fears, hitting a more than three-week high, after a report Thursday showed the U.S. economy unexpectedly contracted in the second quarter and Treasury yields touched a three-month low. The bullion had little reaction to this morning’s inflation data.
One of the Fed’s favorite data points, the personal consumption expenditures price index, rose 6.8% from a year ago in June per the Bureau of Economic Analysis. That’s its highest level since January 1982. A previous report showed the U.S. consumer price index rose 9.1% in June.
Front-month gold futures surged 1.8% Thursday to settle at $1,769.20 an ounce on Comex. The December contract gained 1.4% in the first four days of the week. Bullion is down 2.1% so far 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. The December contract is currently up $25.50 (+1.45%) an ounce to $1763.00 and the DG spot price is $1758.60.
The Fed boosted interest rates by another 75 basis points, after a similar move at its June meeting as part of an effort to combat soaring inflation. Rate increases are typically bearish for gold because they make assets like Treasurys more attractive alternate investments. But the inflation underlying the Fed’s moves is bullish for gold, a traditional haven against inflation. Investors traditionally also turn to gold to protect against economic uncertainty.
“While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data,” Fed Chairman Jerome Powell said Wednesday at a news conference following the rate decision. “The labor market is extremely tight, and inflation is much too high.”
U.S. GDP fell 0.9% in the second quarter, the second straight decline, and possibly a strong indicator of an economic recession. The preliminary report from the Bureau of Economic Analysis was worse than the 0.3% gain that analysts had expected. The contraction in the three months ended in June follows a 1.6% decline in the first quarter.
Reports due next week on manufacturing levels and U.S. employment will be closely watched for further indicators that a recession may be underway. Recession fears and ongoing uncertainty over the pandemic and the war in Ukraine have kept gold prices elevated.
September silver futures gained 6.8% Thursday to settle at $19.87 an ounce on Comex, and the front-month contract is up 6.7% so far this week. Silver is down 2.4% 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 $0.107 (+0.54%) an ounce to $19.975 and the DG spot price is $20.03.
Spot palladium rose 4.3% Thursday to $2,120.00. It’s up 3.6% so far this week. It’s up 7.9% 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 is slightly up $4.30 an ounce to $2,114.50.
Spot platinum decreased 0.6% Thursday to $893.80 an ounce, but is up 0.7% so far this week. It’s down 1.7% in July after losing 7.2% in June. It dropped 9.4% last year. The DG spot price is currently up $5.90 an ounce to $896.90.
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