Gold tips up on this morning’s surprising inflation data, the highest rise in almost 40 years. The yellow metal has boosted $5 an ounce on the news.
The consumer price index, rose 7% in December from a year earlier, the fastest jump since June 1982, however it was in line with economists’ estimates. Excluding food and energy, the core CPI was up 5.5% on the year, the biggest growth since February 1991.
Soaring inflation is bearish for gold as it may prompt the Federal Reserve to act sooner rather than later to raise interest rates, making the yellow metal a less attractive alternate investment. But gold’s traditional status as a hedge against inflation provides some support.
February gold futures rose 1.1% Tuesday to settle at $1,818.50 an ounce on Comex. The front-month contract gained 1.2% in the first two days of the week. Gold advanced 2.9% in December — its best month since May — and climbed 4.1% in the fourth quarter. But it dropped 3.5% in 2021. Currently, the February contract is up $4.70 (+0.26%) an ounce to $1,823.20 and the DG spot price $1,824.10.
“If we see inflation persisting at high levels longer than expected, then if we have to raise interest more over time, we will,” Fed Chairman Jerome Powell said Tuesday at a Senate confirmation hearing for his second term in office. “We will use our tools to get inflation back.”
Powell said he anticipates a series of interest rate hikes in 2022 as well as a scaling back of Fed stimulus measures used to support the economy at the beginning of the pandemic. He spoke at a Senate confirmation hearing for a second term at the post.
The CME FedWatch Tool showed that 79% of traders anticipate a rate increase at the March meeting of the Federal Open Market Committee, up from 71% a week ago. The Fed committee also meets at the end of January, but few traders anticipate a rate hike then.
Investors also continued to watch the spread of the omicron variant of the coronavirus for any indications that that it may derail the economic recovery, which could boost gold prices.
March silver futures increased 1.6% Tuesday to settle at $22.81 an ounce on Comex. The front-month contract rallied 1.8% in the first two days of the week. Silver gained 2.4% in December and 5.9% in the fourth quarter, though it dropped 12% in 2021. Silver prices are tied to industrial demand. The March contract is currently up $0.273 (+1.20%) an ounce to $23.085 and the DG spot price is $23.14.
Spot palladium rose 0.6% Tuesday to $1,930.50 an ounce. It was up 50 cents in the first two days of the week. Palladium rallied 9.6% in December, but it fell 0.4% in the fourth quarter and 22% in 2021. A global shortage of semiconductor chips means auto production is down, which has pressured demand for the metal. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price is up $0.40 an ounce to $1,934.50
Spot platinum rallied 4.1% Tuesday to $980.00 an ounce. It advanced 1.4% in the first two days of the week. The metal gained 2.9% in December and 0.2% in the fourth quarter. It lost 9.4% last year. The DG spot price is currently up $4.00 an ounce to $988.70.
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