Gold steady on inflation data

Gold steady on inflation data

Gold steady on this morning’s inflation data that came in a bit cooler than expected. The yellow metal still poised for a weekly loss coming off late week’s record highs that were driven by Middle East tensions. It’s the first weekly dip in six weeks.

While inflation remains elevated per this morning’s personal consumption expenditures (PCE) price index, it didn’t rise as much as feared. That relief was reflected in the price of gold which hung on to its overnight gain of $10 an ounce. The PCE Index is a key barometer for the Federal Reserve. Including food and energy, the all-items PCE price gauge increased 2.7%, compared to the 2.6% estimate, the Commerce Department reported Friday. Markets showed little reaction to the data, with Wall Street poised to open higher with futures traders slightly more optimistic about two potential rate cuts this year.

The U.S. central bank will have to “recalibrate” its plans for rate cuts after a series of reports has shown that inflation is remaining stubbornly high, Chicago Fed President Austan Goolsbee said in the Wall Street Journal on Thursday. The comments were made in an interview last week. 

U.S. GDP data that came out Thursday, missed all forecasts. But U.S. weekly initial jobless claims fell to the lowest level since mid-February, an unexpected decline to a two-month low. 

Front-month gold futures gained 0.2% Thursday to settle at $2,342.50 an ounce on Comex, though the most-active June contract is down 3% so far this week. Bullion is up 4.7% this month after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. The June contract is currently up $12.00 (+0.51%) an ounce to $2354.50 and the DG spot price is $2341.40.

The Fed’s favorite inflation measure – the personal consumption expenditures price index – comes out Friday with March data. The Fed’s goal is for 2% inflation. The Fed closely watches both labor market conditions and inflation when determining monetary policy.  

In other economic news, personal income and University of Michigan consumer spending data are due Friday.

Most investors are now anticipating a Fed rate cut won’t come until September. The Fed has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last month.

About 97% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 3% expect a 25 basis point cut. More than 85% of investors also expect the Fed to hold rates at current levels in June, and about two-thirds anticipate rates holding steady in July. 

The Bank of Japan on Friday kept interest rates near ultra lows and projected inflation near 2% for years to come. 

July silver futures increased 1.1 cent Thursday to settle at $27.63 an ounce on Comex, though the front-month contract fell 5.1% in the first four days of the week. Silver is up 11% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract is currently up $0.232 (+0.84%) an ounce to $27.865 and the DG spot price is $27.51.

Spot palladium dropped 2.3% Thursday to $991.50 an ounce and is down 3.7% so far this week. Palladium is down 3.5% this month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. The current DG spot price is down $17.00 an ounce to $970.00.

Spot platinum increased 0.9% Thursday to $920.70 an ounce and declined 1.9% in the first four days of the week. Platinum is up 0.7% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The DG spot price is currently up $4.00 an ounce to $922.50.

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