Gold Softens ahead of inflation report

Gold Softens ahead of inflation report

Gold softens on a slightly stronger dollar early Monday ahead of a key inflation report for January, set for release on Tuesday.

The consumer price index and other inflation reports are being closely watched as indicators of the Federal Reserve’s future policy moves including interest rate hikes. Higher rates are bullish for gold because they diminish its attractiveness as a haven asset. 

Front-month gold futures fell 0.1% last week to settle at $1,874.50 an ounce on Comex after the April contract slipped 0.2% Friday. Bullion increased 6.5% in January after gaining 3.8% in December and 7.3% in November. It was the longest consecutive monthly rally since July 2020. The metal fell $2.40 in 2022. The April contract is currently down $7.2 (-0.38%) an ounce to $1867.30 and the DG spot price is $1858.40.

The Fed raised rates by 25 basis points earlier this month to 4.50% to 4.75% and is expected to take them above 5% this year. The February move followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September, and November. 

Philadelphia Fed President Patrick Harker said Friday that he anticipates a few more rate hikes this year, though he thinks the Fed should stick with 25 basis point increases for now. He said he expects the Fed to raise rates above 5% but there is uncertainty about to what point.  

Most investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by another 25 basis points in March. The tool shows 90.8% of investors anticipating a 25-basis-point hike, with the remaining 9.2% expect the Fed to raise rates by 50 basis points to 5.00% to 5.25%. 

Smaller rate hikes – and cuts – are seen as bullish for gold, while larger hikes are bearish. 

Front-month silver futures dropped 1.5% last week to settle at $22.08 an ounce on Comex as the March contract retreated 0.3% Friday. Silver fell 0.9% in January after rising 10% in December and increasing 14% in November. It advanced by 3% in 2022. The March contract is currently down $0.160 (-0.72%) an ounce to $21.915 and the DG spot price is $21.97.

Spot palladium fell 4.9% last week to $1,559.00 an ounce after tumbling 5.4% Friday. Palladium dropped 7.5% in January after retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is up $1.10 an ounce to $1561.00.

Spot platinum decreased 2.4% last week to $956.70 an ounce and fell 1% Friday. Platinum retreated 4.3% in January after increasing 3.4% in December and rising 11% in November. It surged 10% in 2022. The DG spot price is down $11.00 an ounce to $944.50.

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