Gold tips up despite economic data

Gold tips up despite economic data

Gold tips up in Wednesday morning trading as safe haven buyers return to power the rally sparked by the Middle East conflict and treasuries subside despite this morning’s economic data showing inflation ticking up in September.

The producer price index (PPI) increased 0.5% for September, per this morning’s Labor Department report. The forecast from the street called for a 0.3% rise.

The next big inflation reports, the consumer price index for September, comes out Thursday. The report, along with the minutes of the last Federal Reserve policy meeting, due Wednesday, are likely to provide signals on the central bank’s next moves on monetary policy.

The Fed has raised rates by 5.25 percentage points since March 2022, but may be approaching the end of the rate cycle if inflation continues to drop. 

Front-month gold futures rose 0.6% Tuesday to settle at $1,875.30 an ounce on Comex, and the December contract gained 1.6% in the first two days of the week. Bullion fell 5.1% in September after dropping 2.2% in August and rising 4.1% in July. The metal is up 2.7% in 2023. The December contract is currently up $7.40 (+0.39%) an ounce to $1881.70 and the DG spot price is $1872.80.

The war between Israel and Hamas caused gold to rally from seven-month lows as investors sought haven assets. 

Meanwhile, Minneapolis Fed President Neel Kashkari said Tuesday that the Fed might not need to raise rates as much as it otherwise might have because of a recent rise in long-term Treasury yields. San Francisco Fed President Mary Daly said tighter financial conditions may mean the Fed “doesn’t have to do as much.” Both comments were perceived as dovish in terms of monetary policy.

The central bank held its benchmark interest rate at 5.25% to 5.50% in September. About 84.3% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November. Just 15.7% expect it to raise rates another 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold, though also by a smaller margin. 

Fed policymakers have said they closely watch data on inflation and the labor market when setting monetary policy. The U.S. jobs report for September topped all economists’ forecasts when it came out Friday, and the resilient labor market increased the odds that the Fed will continue its aggressive monetary policy to curb inflation. 

Front-month silver futures edged up 0.1% Tuesday to settle at $21.95 an ounce on Comex, and the December contract advanced 1.1% in the first two days of the week. Silver decreased 9.5% last month after slipping 0.6% in August and gaining 8.5% in July. It’s down 8.7% in 2023. The December contract is currently up $0.162 (+0.74%) an ounce to $22.115 and the DG spot price is $22.11.

Spot palladium rallied 3.6% Tuesday to $1,190.00 an ounce, and it gained 0.4% so far this week. Palladium rose 3% last month after sliding 5.3% in August and rising 3.6% in July. Palladium has plummeted 34% so far this year. Currently, the DG spot price is down $10.40 an ounce to $1178.00

Spot platinum dropped 0.4% Tuesday to $891.10 an ounce, though it rose 0.5% in the first two days of the week. Platinum declined 6.6% last month after advancing 1.7% in August and gaining 5.2% in July. Platinum is down 17% in 2023. The DG spot price is currently down $1.20 an ounce to $892.00.

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