Gold tips up on hotter than expected inflation data and a slightly weakened dollar, but the yellow metal looks headed for the biggest quarterly drop since early 2021 suppressed by anticipation of continued aggressive monetary policy to combat 40-year highs in inflation.
August’s inflation was hotter than expected per the Commerce Department’s report on Friday. The personal consumption expenditures price index excluding food and energy rose 0.6% for the month after being flat in July, faster than the Dow Jone’s 0.5% forecast. On a year-over-year basis, core PCE increased 4.9%, more than the 4.7% estimate and up from 4.7% the previous month. The PCE data is followed closely by the Fed.
Gold ticked slightly higher earlier Friday as the dollar dipped from near 20-year highs and after equities plummeted to 22-month lows Thursday.
The yellow metal was down about 8% for the third quarter through Thursday because of the rate increases of 75 basis points each in June, July, and September. Higher interest rates are bearish for gold because they make the yellow metal less attractive as an alternate investment. So does a strong dollar, which has gotten a boost from the aggressive monetary policy.
Front-month gold futures slipped $1.40 Thursday to settle at $1,668.60 an ounce on Comex, though they’re up 0.8% in the first four days of this week. It would be the first weekly rally in three weeks. Bullion is down 3.3% so far this month after losing 3.1% in August and 1.4% in July. The metal retreated 3.5% in 2021. Currently, the December contract is up $2.5 (+0.15%) an ounce to 1671.10 and the DG spot price is $1666.50.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.29 metric tons Thursday, in the first increase in two weeks, according to Reuters.
Cleveland Fed President Loretta Mester said Thursday that the central bank has to maintain its aggressive stance to restrain high inflation. The key interest rate is currently at 3% to 3.25%, the highest level since early 2008, after the latest increase last week.
Investors are betting there’s a 56.1% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with 43.9% projecting a 50-basis-point hike, according the CME FedWatch Tool.
The Labor Department’s weekly initial jobless claims report showed Thursday that filings for unemployment claims fell to their lowest level in five months last week, indicating that the Fed’s moves aren’t doing much to loosen a tight labor market.
Front-month silver futures dropped 0.9% Thursday to settle at $18.71 an ounce on Comex, bringing the December contract’s four-day decline to 1.1%. Silver is up 4.6% this month after tumbling 12% in August and slipping 0.8% in July. It’s down 8.1% in the third quarter and retreated 12% in 2021. Silver prices are tied to industrial demand. The December contract is currently up $0.168 (+0.90%) an ounce to $18.880 and the DG spot price is $18.99.
Spot palladium increased 2.5% Thursday to $2,240.00 an ounce and is up 6.9% so far this week. Palladium is up 7.4% this month after retreating 3.3% in August and rising 9.9% in July. It advanced 14% so far this quarter and dropped 22% in 2021. Currently, the DG spot price is down $5.60 to 2230.50.
Spot platinum lost 0.8% Thursday to $871.40 an ounce and rose 0.5% in the first four days of the week. Platinum is up 2.4% this month after tumbling 6.1% in August and decreasing 0.3% in July. It fell 4.2% so far this quarter and 9.4% last year. The DG spot price is down $5.30 an ounce this morning to $867.40.
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