Gold Slips Off Inflation-Inspired Boost

Gold Slips Off Inflation-Inspired Boost

Gold slips off brief. inflation-inspired boost, settling back down to the level it hit early Friday as U.S. Treasury yields advanced ahead of the release of a key U.S. inflation report. The yellow metal briefly rose over $10 an ounce on the news that inflation hit 8.6% in May from a year ago.

The CPI’s 8.6% leap is its highest since December 1981, while core inflation excluding food and energy rose 6%. Both were higher than expected. The surge is powered by the price of food, gas and energy, with fuel oil up 106.7% over the past year. All eyes turn to the Fed pondering if it will alter its existing strategy to combat 40-year highs in the costs of goods and services.

August gold futures slipped 0.2% Thursday to settle at $1,852.80 an ounce on Comex. The most-active contract is up just 0.1% in the first four days of the week. Gold dropped 3.3% in May, its worst month since September. It retreated 3.5% in 2021. The August contract is currently down $20.50 (-1.11%) an ounce to $1,832.30 and the DG spot price is $1,831.60.

Gold came under pressure early Friday as U.S. Treasury yields ticked up ahead of the CPI report, making the yellow metal less attractive as an alternate investment. 

The Fed’s favorite inflation measure – the personal consumption price index — slowed to 6.3% in April from a 40-year high of 6.6% in March, data released at the end of May showed. It was the first decline in the personal consumption index in a year and a half. 

Fed officials have signaled that they will raise interest rates by a half percentage point in both June and July to tackle the inflation rate. But investors fear that the economy may be entering a slowdown which may require a shift in strategy. 

Most investors still expect the Fed to raise rates another half percentage point at policymakers’ next scheduled meeting in June 15, according to the CME’s FedWatch Tool. The central bank increased benchmark rates by half a percentage point in May, in the second rate hike of 2022 and the largest in 22 years. Rate increases are typically considered bearish for gold. 

Gold still has some haven support because of uncertainty around the COVID-19 pandemic and the war in Ukraine. 

Front-month silver futures decreased 1.3% Thursday to settle at $21.82 an ounce on Comex and are down 0.4% in the first four days of the week. Silver dropped 6.1% in May after losing 8.2% in April. It retreated 12% in 2021. Silver prices are tied to industrial demand. The July contract is down $0.412 (-1.89%) an ounce to $21.405 and the DG spot price is $21.52.

Spot palladium dropped 1.1% Thursday to $1,959.50 an ounce and is down 2.4% so far this week.  The metal lost 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. Currently, the DG spot price is down $27.60 an ounce to $1,933.00.

Spot platinum retreated 3.1% Thursday to $984.90 an ounce, and it declined 3.3% in the first four days of the week. It gained 2.3% last month and lost 9.4% last year. The DG spot price is down $13.10 currently to $973.80.


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