Gold Slips After Inflation Report

Gold slips after inflation report

Gold slips early Friday after a stronger-than-expected inflation report for September made it more likely that the Federal Reserve will continue its aggressive monetary policy. 

This morning’s consumer spending report offered the yellow metal no respite, although the bullion showed little movement. Per the Commerce Department, September’s consumer spending was flat while prices rose. Retail and food services sales were flat, below the Dow Jones forecast of a 0.3% bump. This follows a 0.4% rise in August.

The consumer price index surged 8.2% in September from a year earlier, the Bureau of Labor Statistics reported Thursday. That put core U.S. inflation at a 40-year high. The CPI rose 0.4% in September from August on a seasonally adjusted basis, compared with 0.1% a month earlier. So-called core CPI, the index excluding food and energy costs, increased 6.6% from a year earlier to the highest level since 1982, while it climbed 0.6% for a second month.

High inflation makes it more likely that the Fed will impose another 75 basis point interest rate increase at policymakers’ next meeting in early November, and that’s bearish for gold. But the inflation report pressured the dollar Thursday, which propped up prices for the yellow metal. So gold was little changed Thursday.

Front-month gold futures slipped 50 cents Thursday to settle at $1,677.00 an ounce on Comex, though the December dropped 1.9% in the first four days of the week. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 8.3% this year. Currently, the December contract is down $14.0 (-0.83%) an ounce to $1663.00 and the DG spot price is $1654.80.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.12% Thursday to 944.31 metric tons, Reuters reported. 

Investors are now betting there’s a 98.2% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with the remaining 1.8% projecting a 100-basis-point hike, according the CME FedWatch Tool. A month ago, just 49.8% of investors anticipated a 75-basis-point increase, with 34.9% predicting a 50-basis-point hike. 

The Fed has raised interest rate by 300 basis points so far this year, with 75 basis points increases each in June, July and September. There are two more meetings left this calendar year.

Minutes of the last meeting of Fed policymakers, which came out Wednesday, showed the pace of inflation has surprised officials, and they anticipated continuing hikes and keeping interest rates high until prices come down. 

Reports last week showed that inflation tracked by the personal consumption expenditures price index, the Fed’s favorite inflation measure, was stronger than analysts had expected in August, while jobs growth slowed in September along with U.S. manufacturing.

Front-month silver futures fell 0.1% Thursday to settle at $18.92 an ounce on Comex, and the December contract decreased 6.6% in the first four days of the week. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 19% this year. The December contract is currently down $0.258 (-1.36%) an ounce to $18.660 and the DG spot price is $18.70.

Spot palladium slipped 0.5% Thursday to $2,141.00 an ounce, and it tumbled 3.5% so far this week. Palladium gained 5.9% last month and 13% in the third quarter. It’s up 12% in 2022. Currently, the DG spot price is down $40.20 an ounce to $2102.00.

Spot platinum advanced 2.1% Thursday to $910.50 an ounce, though it decreased 1.6% in the first four days of the week. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 6.4% this year. The DG spot price is currently up $10.80 an ounce to $917.20.

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