Gold slips after surging on Ukraine headlines. It retreated early Friday after settling Thursday to its highest level in more than 13 months. The rally, sparked by Russia’s invasion of Ukraine, came off its highs after U.S. President Joe Biden and other world leaders announced a series of extensive sanctions on Russia and Russian elites in response to the invasion.
The yellow bullion then failed to find support from this morning’s inflation data, shrugging off January’s 5.2% jump for core PCE price index, the Fed’s preferred measure. This is the biggest rise since April 1983. Consumer spending in January steamed ahead, up 2.1%, topping the 1.6% estimate. Durable goods orders displayed economic optimism, rising 1.6% which is twice the forecast.
Yesterday’s response to Russia’s aggression helped calm the markets, with the stock market whipsawing off steep declines by Thursday’s close. “Putin chose this war,” Biden said at a White House news conference Thursday. “And now he and his country will pay the consequences.”
The measures, which Biden acknowledged will take time to be felt, include export restrictions on technology and sanctions on banks and individuals. The Standard & Poor’s 500 Index, which plummeted on the invasion headlines early Thursday, closed in the black following news of the sanctions.
Front-month gold futures rose 0.8% Thursday to $1,926.30 an ounce on Comex and have climbed 1.4% so far this week. Gold is up 7.2% this month after dropping 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is currently down $33.30 (-1.73%) an ounce to $1,893.00 and the DG spot price is $1,889.30.
Russian troops were advancing toward the Ukrainian capital, Kyiv on Friday, hours after Ukrainian President Volodymyr Zelensky vowed to remain in Kyiv even as “enemy sabotage groups” entered the city and put him in their crosshairs.
While gold traded near above $1,900 as investors flocked to the precious metal as a hedge against geopolitical uncertainty, the specter of an interest rate hike continued to dampen prices.
Cleveland Fed President Loretta Mester said Thursday that she still supports starting a series of interest rate increases in March, unless there is an “unexpected turn in the economy.” But both she and Atlanta Fed President Raphael Bostic acknowledged that the Ukraine situation is a risk factor for the economy and financial markets.
The strife in Ukraine caused commodity prices to surge Thursday, which may only worsen the high U.S. inflation which is spurring the Fed moves. High inflation is bullish for gold, though rate increases are bearish.
In other economic news Thursday, U.S. fourth-quarter GDP was revised up to 7%, and there were fewer new jobless claims last week than had been expected. Investors will be watching Friday for data on U.S. consumer income and durable goods and the University of Michigan consumer sentiment report.
Front-month silver futures increased 0.5% Thursday to $24.71 an ounce on Comex and rallied 2.8% so far this week. Silver is up 10% in February after dropping 4.1% in January. It fell 12% in 2021. Silver prices are tied to industrial demand. The May contract is down $0.675 (-2.73%) an ounce to $24.035 and the DG spot price is $23.98.
Spot palladium reached $2,711.18 on Thursday, its highest since July 2021, on fears of a supply disruptions from Russia, a major palladium producer. Palladium is up 6.5% this month after rallying 24% in January. It retreated 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. The DG spot price is currently down $98.90 an ounce to $2,421.50.
Spot platinum fell 3.1% Thursday to $1,061.50 an ounce. It’s down 1.8% so far this week. The metal is up 3.2% in February after rising 5.7% in January. It lost 9.4% last year. Currently, the DG spot price is down $4.60 an ounce to $1,062.50.
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