Gold trades near one-month lows after inflation report

Gold trades near one-month lows after inflation report

Gold trades near one-month lows early Friday, pressured by a strong dollar and bond yields, even as the latest inflation report added to speculation that the Federal Reserve will pause its series of interest rate hikes next month.

A strong dollar and strong bond yields make gold less attractive to investors than other assets, but a pause in interest rates would be considered bullish. 

While the consumer price index report Thursday came in better than expected, investors will be closely watching the producer price index figures and consumer sentiment data due out Friday for a fuller picture. 

Front-month gold futures fell $1.70 Thursday to settle at $1,948.90 an ounce on Comex, and the December contract is down 1.4% this week. Bullion rose 4.1% in July after losing 2.7% in June and retreating 0.9% in May. The metal gained 5.7% in the first half of the year after falling $2.40 in 2022. Currently, the December contract is down $0.8 (-0.04%) an ounce to $1948.10 and the DG spot price is $1917.60.

The so-called core CPI, which excludes volatile food and energy costs, posted the smallest back-to-back gains in two years in June and July, based on July data released Thursday. Core CPI rose 0.2% for a second month, according to the Bureau of Labor Statistics. Overall CPI also increased 0.2%.

Following the CPI report, about 86.5% of investors tracked by the CME FedWatch Tool were betting that the Fed will keep its federal funds rate unchanged in September at 5.25% to 5.50%. Just 13.5% expect it to raise rates another 25 basis points. Most investors tracked by the tool are betting that it will then hold at that rate at the remaining meetings this year. The central bank has raised rates by 5.25 percentage points since March 2022 in an effort to rein in inflation.

Comments from Fed officials Thursday, though, showed that a pause to rate hikes isn’t certain. Philadelphia Fed President Patrick Harker suggested that rate hikes may be at an end because “we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work.” 

On the other hand, San Francisco Fed President Mary Daly said the inflation move was in the right direction but more progress is needed. 

September silver futures gained 0.4% Thursday to settle at $22.82 an ounce on Comex. The most-active contract is down 3.8% so far this week. Silver gained 8.5% in July after dropping 2.4% in June and decreasing 6.5% in May. It retreated 4.2% in the first half of the year after rising 3% in 2022. The September contract is currently down $0.061 (-0.27%) an ounce to $22.760 and the DG spot price is $22.70.

Spot palladium increased 4.7% Thursday to $1,312.50 an ounce and has advanced 2.3% this week. Palladium rose 3.6% in July after falling 9.5% in June and tumbling 9.3% in May. Palladium plummeted 31% in the first half of the year after losing 5.7% in 2022. The DG spot price is currently slightly down, $0.50 an ounce, to $1326.00.

Spot platinum rose 2.1% Thursday to $916.40 an ounce and is down 1.4% so far this week. Platinum gained 5.2% in July after falling 9.3% in June and retreating 7.4% in May. Platinum dropped 15% in the first half of the year after surging 10% in 2022. Currently, the DG spot price is down $5.90 an ounce to $912.90.

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