Gold Slips on Economic Data

Gold Slips on Economic Data

Gold slips this morning on the release of U.S. economic data that illustrate the country’s ongoing fiscal struggle against the pandemic including disappointing retail sales and Producer Price Index (PPI) for December. The yellow metal fell over $10 an ounce on the news, but has regained a little of that ground and is back over $1,840 and ounce.

U.S. retail sales in December declined as additional measures to slow Covid-19’s spread undercut spending at restaurants and reduced traffic to shopping malls. Retail sales dropped 0.7% last month, the Commerce Department said on Friday.

U.S. producer prices rose moderately in December, missing the market’s forecast, suggesting that an anticipated pick up in inflation in the coming months will probably not be worrisome. The producer price index for final demand increased 0.3% last month the Labor Department said on Friday. Economists had forecast a .4% rise.

Gold had been headed for a second consecutive weekly rally as U.S. President-elect Joe Biden outlined plans for a $1.9 trillion spending package to fight the cornavirus and its economic repercussions and Federal Reserve chairman indicated monetary policy would remain accommodative.

Biden’s stimulus proposal was bullish for gold because it would increase the yellow metal’s appeal as an inflation hedge, while the Fed’s stance to keep interest rates low would increase gold’s attractiveness as an investment.

Front-month gold futures have advanced 0.9% so far this week, settling at $1,851.40 an ounce Thursday on Comex. The February contract slipped 0.2% Thursday and has traded in a narrow range all week, signaling that prices are consolidating. Currently, the February contract is down over $9 an ounce to $1,841.60 and the DG spot price is $1,844.00.

Gold climbed $372 — or 24% — in 2020 because of uncertainty about the economy and the coronavirus pandemic.

Biden’s plan, unveiled Thursday, allocates more than $400 billion to fight the pandemic directly, earmarks another $350 billion for state and lower governments and would pay individuals $1,400 and improve unemployment and paid-leave benefits. Biden will be sworn in next week, at which time the Senate will also fall under Democratic control, which will likely enable him to push through much of his early agenda.

Meanwhile, the Fed Chairman Jerome Powell said Thursday that he doesn’t see any interest-rate increases on the horizon as long as inflation remains low.

“When the time comes to raise interest rates, we’ll certainly do that, and that time, by the way, is no time soon,” he said in a virtual Q&A session Thursday sponsored by Princeton University.

The pandemic continues to worsen and take a toll on the economy, with weekly initial jobless claims surging to the highest level since August last week, according to data released Thursday by the Labor Department.

The COVID-19 virus has killed almost 2 million people worldwide and sickened about 93.1 million. About 25% of the cases — and 19% of the deaths — are in the U.S. The country has more than 23.3 million cases, more than any other nation.

Investors are continuing to watch the political situation in the U.S. and the possibility of violence around the Biden inauguration next week. In economic news, retail sales and producer price index data are due Friday.

Front-month silver futures rose 0.9% Thursday to settle at $25.80 an ounce on Comex. The March contract climbed 4.7% in the first four days of this week after tumbling 6.7% last week. Silver surged 17% in December and 47% in 2020. The March contract is currently down $0.842 to $24.96 and the DG spot price is $24.94.

Spot palladium rose 1.1% Thursday to $2,435.50 an ounce and is up 3.4% so far this week. It slipped 3.9% last week after rallying 2% in December and 26% in 2020. Currently, the DG spot price is up over $10 an ounce to $2,446.50.

Spot platinum rose 1.4% Thursday to $1,127.20 an ounce and is up 6.4% so far this week. The metal lost 1.3% last week after adding 11% in December and 11% in 2020. The DG spot price is currently down $27 an ounce to $1,099.00.

 

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