Gold Slips On Hotter Inflation

Gold Slips On Hotter Inflation

Gold slips on hotter inflation after dipping early Wednesday as investors await the release of the Fed minutes from the last meeting of the policymakers.

Inflation took an unexpected upturn in September per this morning’s producer price index (PPI). U.S. PPI rose 0.4% for September, compared with the forecast of 0.2%, per the Bureau of Labor Statistics. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.

Aggressive monetary policy by global central bankers to rein in 40-year highs in inflation has pressured the yellow metal over the past few months. The data are being closely watched for indications on the pace of Fed interest rate increases and the prospects policymakers see for an economic slowdown or recession. While gold is a traditional hedge against inflation and economic uncertainty, rising interest rates are bearish for the precious metal. 

U.S. President Joe Biden acknowledged Tuesday that a “slight recession” is possible in an interview with CNN, though he said he didn’t think it was likely.

“I don’t think there will be a recession,” he said. “If it is, it will be a very slight recession. That is, we’ll move down slightly.” Later in the interview with Jake Tapper, he said, “It is possible. Look, it’s possible. I don’t anticipate it.”

The International Monetary Fund on Tuesday downgraded its forecast for global economic growth by 0.2 percentage point to 2.7%, saying “the worst is yet to come, and for many people, 2023 will feel like a recession.” The IMF cited the war in Ukraine, high inflation and a slowdown in China. 

Front-month gold futures rose 0.6% Tuesday to settle at $1,686.00 an ounce on Comex, though the December dropped 1.4% in the first two days of the week. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 7.8% this year. Currently, the December contract is down $8.10 (-0.48%) an ounce to $1677.90 and the DG spot price is $1669.60.

Minutes of the last meeting of Fed policymakers come out Wednesday afternoon at 2 pm EST. The Fed has raised interest rates by 300 basis points so far this year, with 75 basis points increases each in June, July and September. The next meeting is in November.

September consumer price index data are due out Thursday. Inflation tracked by the personal consumption expenditures price index, the Fed’s favorite inflation measure, was stronger than analysts had expected in August, according to data released last week.  

The September jobs report last week showed that growth slowed, though U.S. unemployment fell to 3.5%. A separate report last week showed that U.S. manufacturing grew at it slowest pace in two and a half years in September.

Investors are betting there’s a 82.8% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with 17.2% projecting a 50-basis-point hike, according the CME FedWatch Tool. A week ago, just 64.7% of investors anticipated a 75-basis-point increase, with 35.3% predicting a 50-basis-point hike. 

Front-month silver futures dropped 0.7% Tuesday to settle at $19.49 an ounce on Comex, and the December contract decreased 3.8% in the first two days of the week. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 17% this year. The December contract is currently down $0.422 (-2.17%) an ounce to $19.065 and the DG spot price is $19.01.

Spot palladium slipped 0.3% Tuesday to $2,176.50 an ounce, and it tumbled 1.9% so far this week. Palladium gained 5.9% last month and 13% in the third quarter. It’s up 14% in 2022. The current DG spot price is down $33.20 an ounce to $2137.00.

Spot platinum advanced 0.2% Tuesday to $906.50 an ounce, though it decreased 2.1% in the first two days of the week. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 6.8% this year. Currently, the DG spot price is down $15.30 an ounce to $893.90.

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