Gold steady Wednesday morning, near all-time high as key inflation data continues to point to a September interest rate cut by the Federal Reserve.
This morning’s consumer price index, a broad-based measure of prices for goods and services, shows an increase of just 2.0% for July, making the 12-month inflation rate 2.9%. Economists surveyed by Dow Jones had been looking for respective readings of 0.2% and 3%. The Labor Department report is likely to keep an interest rate cut on the table in September.
The wholesale inflation measure, the producer price index, came out Tuesday and showed inflation rose less than expected last month.
Front-month gold futures rose 0.2% Tuesday to settle at $2,507.80 an ounce on Comex, and the most-active December contract rallied 1.4% in the first two days of the week. Bullion increased 5.7% in July, its biggest monthly gain since March. Gold fell 0.3% in June and gained 1.9% in May. The metal rose 13% in 2023. The December contract is currently down $2.50 (-0.10%) an ounce to $2505.30 and the DG spot price is $2463.00
Gold initially pared losses Tuesday after the PPI index came in short of economists’ expectations but ultimately was little changed for the day.
Wholesale prices rose 0.1% last month, less than economists’ consensus forecast of 0.2%. Excluding volatile food and energy prices, core PPI was flat. On a year-on-year basis, headline PPI rose 2.2%, down from a 2.7% reading in June.
The Fed closely watches both inflation and labor market data when determining monetary policy, particularly as concerns have mounted over a possible recession. Models from Goldman Sachs and JPMorgan Chase show that signals of an economic downturn have “risen materially,” Bloomberg reported, though it said the possibility of a recession “remains an outside chance.”
The central bank has a 2% target for inflation. The Fed has kept interest rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
Investors tracked by the CME FedWatch Tool unanimously expect the Federal Reserve to begin interest rate cuts at the central bank’s next policy meeting in September. Just over 40% expect a 50 basis point cut, while the rest anticipate a 25 basis point cut. Any reduction would be considered bullish for gold, which becomes a more attractive alternate investment when rates go down. A larger rate cut would be more bullish than a smaller one.
The continuing standoff in the Middle East also kept gold prices elevated amid haven demand. A Hamas official said Tuesday that it wouldn’t take part in a new round of ceasefire talks Thursday, saying that the government of Israeli Prime Minister Benjamin Netanyahu hasn’t been acting in good faith. Meanwhile, Netanyahu clashed with his defense minister, Yoav Gallant, Monday on Gaza, exposing schisms in the Israeli leadership.
September silver futures dropped 0.8% Tuesday to settle at $27.79 an ounce on Comex, while the front-month contract increased 0.7% in the first two days of the week. Silver dropped 2.1% in July after falling 2.9% in June and surging 14% in May. It ticked up 0.2% in 2023. The September contract is currently up $0.089 (+0.32%) an ounce to $27.875 and the DG spot price is $27.94.
Spot palladium rallied 2% Tuesday to $951.00 an ounce and gained 3.1% so far this week. Palladium decreased 4.3% in July after gaining 8.1% in June and declining 5.1% in May. Palladium plummeted 38% last year. Currently, the DG spot price is up $12.50 an ounce to $960.00.
Spot platinum decreased 0.4% Tuesday to $944.60 an ounce and rose 1.5% in the first two days of the week. Platinum lost 2.1% in July after falling 3.7% in June and advancing 10% in May. Platinum dropped 6.8% in 2023. The DG spot price is currently slightly down by $2.50 to $943.40.
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