Gold tips up on inflation report

Gold tips up on inflation report

Gold tips up on this morning’s key inflation report that may influence what the Federal Reserve does next on monetary policy. The yellow metal gained $10 an ounce on the report’s release.

Inflation eased slightly in April per the consumer price index report, providing some relief for consumers. The consumer price index increased 0.3% from March, the Labor Department’s Bureau of Labor Statistics reported Wednesday. That was slightly below the Dow Jones estimate of 0.4%.

On Tuesday, the U.S. producer price index came in higher than economists projected. The Fed has raised interest rates by 5.25 percentage points since March 2022 in an effort to rein in inflation. It was widely expected to start rate cuts this year, but the timeline has been stymied by persistently high inflation.

Fed Chairman Jerome Powell said Tuesday that U.S. inflation has fallen more slowly that central bank policymakers had expected but he expects it to continue to decline throughout the year. He said that another rate increase was unlikely. 

Front-month gold futures gained 0.7% Tuesday to settle at $2,359.90 an ounce on Comex, but the most-active June contract fell 0.6% in the first two days of the week. Bullion gained 2.9% in April 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 July contract is currently up $13.5 (+0.57%) an ounce to $2373.40 and the DG spot price is $2358.00

The producer price index increased 0.5% from a month earlier, following a downwardly revised 0.1% drop in March, according to data from the Bureau of Labor Statistics. The PPI was up the most since April 2023 on a year-on-year basis. But investors said they primarily watch the PPI for components that feed into the Fed’s preferred inflation measure, the personal consumption expenditures price index, and those components were muted.

Gold also came under pressure after the U.S. announced steep tariff increases on a swath of Chinese products, including electronic vehicles, semiconductors and green energy components. The move could affect demand for some metals. 

About 96.9% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 3.1% expect a 25 basis point cut. More than 70% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting. 

July silver futures increased 0.9% Tuesday to settle at $28.70 an ounce on Comex, and the front-month contract rallied 0.7% in the first two days of the week. Silver rose 7% 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 $0.563 (+1.96%) an ounce to $29.265 and the DG spot price is $28.81.

Spot palladium advanced 1.7% Tuesday to $992.50 an ounce and has gained 0.5% so far this week. Palladium declined 5.9% last month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the DG spot price is up $20.10 an ounce to $1011.50.

Spot platinum gained 3.2% Tuesday to $1,039.90 an ounce and has risen 3.7% so far this week. Platinum gained 3.1% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The current DG spot price is up $16.40 an ounce to $1057.00.

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