Gold Up Following Inflation Data

Gold Up Following Inflation Data

Gold up this morning following the release of flat PCE inflation data. The yellow metal solidifying above $1,750, overcoming pressure from the U.S. dollar that traded at its highest level for 2021.

The PCE inflation measure rose 0.4% in August, matching the 0.4% median forecast. This is this fourth month without rising inflation, suggesting price growth is stabilizing as the Biden administration and Federal Reserve anticipated. However, the core personal consumption expenditures (PCE) price index, increased 0.3% for the month and was up 3.6% from a year ago. The monthly gain was slightly higher than the 0.2% Dow Jones estimate and the annual forecast of 3.5%. The Core PCE index excludes the more volatile food and energy costs and is the Federal Reserve’s preferred measure of inflation.

Stocks are rebounding a bit this morning on news of a new oral Covid drug. The Dow is up 100 points as Merck released results of its phase 3 trial of an oral antiviral treatment. The drug, Molnupiravir, showed it reduced the risk of hospitalization or death by around 50% in Covid patients. Next, Merck will seek emergency use authorization from the FDA. The S&P 500 was mostly flat, while the Nasdaq retreated 0.3%.

Gold had lost a little ground late Thursday after U.S. President Joe Biden signed a stopgap spending bill to extend government funding through Dec. 3, preventing a government shutdown slated for midnight.

Investors awaited the release of the key first-of-the-month manufacturing data from the U.S. and other major economies for further direction.

December gold futures rose 2% Thursday to settle at $1,757.00 an ounce on Comex, and the front-month contract is up 0.3% so far this week. Gold retreated 3.4% in September after gaining just 90 cents in August. It dropped $14.60 in the third quarter. The yellow metal is down 7.3% so far in 2021. Currently, the December contract is up $1.10 (+0.06%) an ounce to $1,758.10 and the DG spot price is $1,760.30.

The dollar and Treasury yields have strengthened amid anticipation that central banks will increase interest rates sooner than previously anticipated to combat rising inflation. Though Chicago Federal Reserve President Charles Evans said Thursday that low interest rates will still be needed to bring inflation back to 2%. Central banks around the world cut rates, purchased assets and engaged in other stimulus measures beginning last year to prop up the global economy in the face of the pandemic.

In economic news, Chinese manufacturing unexpectedly contracted in September, according to the official Purchasing Manager’s Index, released Thursday. Separately, the U.S. reported that initial jobless claims rose more than expected last week as hiring remained sluggish.

December silver futures increased 2.6% Thursday to settle at $22.05 an ounce on Comex, though the front-month contract dropped 1.7% for the first four days of the week. Silver retreated 8.2% in September, its fourth consecutive monthly decline, and plummeted 16% in the third quarter. The metal is down 17% so far this year. Silver prices are tied to industrial demand. The December contract is currently up $0.448 (+2.03%) to $22.495 and the DG spot price is $22.48.

Spot platinum rose 1.6% Thursday to $971.30 an ounce and is down 1.9% so far this week. The metal lost 5.3% last month and 10% last quarter. It’s down 9.5% so far this year. Currently, the DG spot price is up $10.60 an ounce to $982.60.

Spot palladium increased 3% Thursday to $1,922.00 an ounce and has retreated 3.1% so far this week. It lost 23% in September, 31% in the third quarter and is down 22% so far in 2021. The DG spot price is currently down $7.80 an ounce to $1,924.00.
 

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