Gold Steadies on Economic Data

Gold Steadies on Economic Data

Gold steadies on economic data this morning, after slipping early Friday when the dollar rallied. This morning’s Commerce Department report shows inflation easing as consumer spending drops.

December’s data shows consumers spent less even as an inflation eased. Personal consumption expenditures (PCE) excluding food and energy increased 4.4% from a year ago, down from 4.7% in November and in line with the forecast. It’s the slowest annual rate jump since October 2021. The monthy core PCE increased 0.3%, also meeting estimates. At the same time, consumer spending was even less than already-modest estimates, indicating that the economy slowed at the end of 2022. This bolsters belief that the Fed’s Feb. 1 interest rate will be just 25 basis points. The Fed raised rates by 50 basis points in December and by 75 basis points each in June, July, September and November in an effort to stem 40-year highs in inflation. 

The next question is how today’s data balances the report Thursday that showed the U.S. economic growth beat estimates for the fourth quarter, assuaging some concerns that the Fed moves were triggering a recession. That could give the central bank room for a bigger hike.

Front-month gold futures fell 0.7% Thursday to settle at $1,946.70 an ounce on Comex. The April contract advanced $1.80 in the first four days of the week. Bullion is up 6.6% this month after gaining 3.8% in December and increasing 7.3% in November. The December increase was the first two-month rally since March. The metal fell $2.40 in 2022. The February contract is currently down $4.90 (-0.25%) an ounce to $1925.10 and the DG spot price is $1926.10.

The U.S. economy expanded at a 2.9% annualized pace in the fourth quarter, even amid high inflation, data from the Bureau of Labor Statistics showed Thursday. Economists had forecast 2.6% growth. The pace was slower than the 3.2% in the prior quarter, however. 

In other economic news, U.S. weekly initial jobless claims fell to the lowest level since April last week, according to data released Thursday. That indicates that the labor market remains resilient, also possibly making room for a larger rate hike.

Larger rate hikes are seen as bearish for gold, while smaller ones are bullish. That’s because higher rates diminish gold’s attractiveness as a haven asset. 

Almost all the investors tracked by the CME FedWatch Tool are now betting that the Fed will boost interest rates by just 25 basis points next week, compared with 59.7% a month ago. The tool shows 98.1% of investors anticipating a 25-basis-point hike, with the remaining 1.9% expecting a 50-basis-point increase. Rates went up by 425 basis points in 2022 to 4.25% to 4.5%, the highest level in 15 years. 

Front-month silver futures increased 0.3% Thursday to settle at $24.02 an ounce on Comex, and the March contract was up 0.4% in the first four days of the week. Silver is down 2 cents this month after rising 10% in December and increasing 14% in November, its biggest monthly gain since December 2020. It advanced 3% in 2022. The March contract is currently down $0.330 (-1.37%) an ounce to $23.690 and the DG spot price is $23.64.

Spot palladium retreated 1.9% Thursday to $1,689.00 an ounce and is down 3.2% so far this week. Palladium is down 6.5% this month after tumbling 4% in December and gaining 0.3% in November. It lost 5.7% in 2022. The current DG spot price is down $47.80 an ounce to $1641.00.

Spot platinum fell 2.1% Thursday to $1,025.40 an ounce and is down 2.3% so far this week. Platinum has retreated 4.2% in January after increasing 3.4% last month and rising 11% in November, its best month since February 2021. It surged 10% in 2022. The DG spot price is currently down $5.50 an ounce to $1017.50.

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