Gold surges to a new all-time high above $2,400 an ounce early Friday, headed for its fourth weekly gain driven by haven demand over geopolitical uncertainty and despite this week’s unexpectedly high inflation report.
In addition to the conflicts in Ukraine and the Middle East, concerns over the Chinese economy is boosting safe haven buys. Central banks increased purchases of gold as a hedge against risk in recent weeks, driving the yellow metal’s series of record highs. Two particular moves include Vietnam’s central bank increasing gold bar supplies to stabilise the market and China’s central bank adding more gold to its reserves in March.
Investors are awaiting April’s preliminary consumer sentiment data due out Friday for further direction. The U.S. consumer price index topped forecasts in March, potentially delaying the Federal Reserve’s planned interest rate hikes until the second half of the year. Rate cuts would be bullish for gold, while persistently high rates are considered bearish. Still, the expected delays in the rate cuts weren’t enough to dull gold’s shine.
Front-month gold futures gained 1% Thursday to settle at $2,372.70 an ounce on Comex, as the most-active June contract increased 1.2% in the first four days of the week. Bullion rose 8.9% in March – the biggest monthly rise in more than three years – after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The June contract is currently up $40.10 (+1.69%) an ounce to $2412.80 and the DG spot price is $2402.40.
So-called core CPI – consumer prices excluding volatile food and energy costs – rose 0.4% last month from February, while the year-on-year rate was unchanged at 3.8%, according to U.S. government data released Wednesday. The report sent equities tumbling and boosted haven assets like the dollar and Treasury yields. But economic activity and the labor market have maintained some strength, which may still lead to the rate cuts.
Wholesale prices also heated up again last month, according to producer price index data released Thursday. But U.S. weekly initial jobless claims fell more than expected last week, according to separate data out Thursday, signaling that the labor market remains resilient.
The Fed has said it closely watches both labor market conditions and inflation when determining monetary policy.
Minutes of the central bank’s March policy meeting, which were released Wednesday, showed that policymakers want to be more confident that inflation is heading toward the Fed’s 2% target. So this week’s inflation reports were seen as pushing out the timeline of any rate cuts.
About 95.6% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 4.4% expect a 25 basis point cut. The central bank 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. More than three quarters of investors also expect the Fed to hold rates at current levels in June, with about half anticipating a rate cut in July.
Front-month silver futures rose 0.7% Thursday to settle at $28.25 an ounce on Comex, as the May contract advanced 2.7% in the first four days of the week. Silver gained 8.9% in March after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023. The May contract is currently up $1.085 (+3.84%) an ounce to $29.335 and the DG spot price is $29.44.
Spot palladium decreased 1.1% Thursday to $1,052.00 an ounce but is up 3.7% so far this week. Palladium advanced 7.7% last month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. The current DG spot price is up $45.30 an ounce to $1091.00.
Spot platinum gained 1.4% Thursday to $982.90 an ounce and is up 5.3% so far this week. Platinum rose 3.3% last month after decreasing 4.9% in February and falling 8% in January. Platinum dropped 6.8% in 2023. The DG spot price is currently up $24.50 an ounce to $1004.40.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.