Gold steadies above $1,820 an ounce on inflation worries. The yellow metal had slipped at the start of the trading day as U.S. Treasury yields rose to their highest level in two years amid widespread expectations of a Federal Reserve rate increase. However, gold has regained altitude on global inflation news as the UK reported its highest inflation in three decades this morning.
Worries over the Fed’s next move are keeping gold somewhat in check. The CME FedWatch Tool showed that 97.1% of traders anticipate a rate increase at the March meeting of the Federal Open Market Committee, up from 78.9% a week ago. The Fed committee also meets next week, but few traders anticipate a rate hike at that time.
Gold’s future direction will likely be driven by the Fed’s moves. Rate increases are typically bearish for the yellow metal because they make it a less attractive investment than other assets. But gold prices remain supported by inflation — for which gold is a traditional hedge — and uncertainty caused by the omicron variant of the coronavirus.
February gold futures slipped 0.2% Tuesday to settle at $1,812.40 an ounce on Comex. U.S. financial markets were closed Monday for the Martin Luther King Jr. Day holiday. The front-month contract rose 1.1% last week. Gold advanced 2.9% in December — its best month since May — and climbed 4.1% in the fourth quarter. But it dropped 3.5% in 2021. Currently, the February contract is up $25.10 (+1.38%) an ounce to $1,837.50 and the DG spot price is $1,837.30.
While the Fed isn’t expected to boost rates next week, investors will be closely watching the statement after the Jan. 25-26 meeting for tone and signals on future actions. Speculation is growing that the FOMC will announce an increase of more than a quarter-percentage point to combat soaring inflation. Last week, data showed U.S. inflation rose at the highest level in 39 years in December.
The omicron variant of the coronavirus continued to spread around the world, adding at threat to the economic recovery which could boost gold prices.
In upcoming economic news, investors will be watching for U.S. data on housing starts Wednesday and initial jobless claims Thursday.
March silver futures rallied 2.5% Tuesday to $23.49 an ounce on Comex. The front-month contract advanced 2.3% last week. Silver gained 2.4% in December and 5.9% in the fourth quarter, though it dropped 12% in 2021. Silver prices are tied to industrial demand. The March contract is up $0.523 (+2.23%) an ounce to $24.015 and the DG spot price is $23.99.
Spot palladium increased 1.2% Tuesday to $1,912.00 an ounce after dropping 2.1% last week. Palladium rallied 9.6% in December, but it fell 0.4% in the fourth quarter and 22% in 2021. A recovery in global automotive output is still expected, which is likely driving a boost in prices of the auto-catalyst palladium during 2022. Currently, the DG spot price is up $116.40 an ounce to $2,038.00.
Spot platinum gained 1.4% Tuesday to $988.70 an ounce adding to last week’s advance of 0.9%. The metal gained 2.9% in December and 0.2% in the fourth quarter. It lost 9.4% last year. The current DG spot price is up $46.90 an ounce to $1,036.40.
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