Gold strongly up this morning on troubling banking headlines. After ticking below the $1900 level in the early trading hours, the yellow metal jumped back over $20 an ounce on European banking concerns and American economic data.
European bank stocks under pressure as Credit Suisse shares drop after its largest investor said it could not provide the Swiss bank with more financial assistance. The headlines have greatly buffed up gold’s safe haven shine.
Meanwhile, this morning’s economic data is good news for Fed doves. All of this morning’s news indicates cooling inflation. February’s producer price index dropped 0.1%, below the estimate for a 0.3% increase. Retail sales fell 0.4% for the February, in line with expectations, led by drops in auto sales and hospitality receipts. Finally, the Empire State Manufacturing survey for March, a gauge of activity in the New York region, posted a -24.6 reading, down 19 points from a month ago.
The February consumer price index report, which came out Tuesday, showed that inflation remained elevated in February, but in line with expectations. The report renewed anticipation that the Fed will stick with a smaller rate hike next week. Interest rate increases are typically bullish for gold because they make the yellow metal less attractive as an alternate investment.
The broader market largely shook off concerns about the financial sector triggered by last week’s collapse of Silicon Valley Bank, which led to a series of rallies. The bank failures raised concerns about the financial system, which was bullish for gold as a traditional hedge against uncertainty.
Front-month gold futures slipped 0.3% Tuesday to settle at $1,910.90 an ounce on Comex, though the April contract surged 2.3% in the first two days of the week. Bullion decreased 5.6% last month, its worst performance since June 2021. It increased 6.5% in January and gained 3.8% in December. The metal fell $2.40 in 2022. The April contract is currently up $12.7 (+0.66%) an ounce to $1923.60 and the DG spot price is $1927.50.
The CPI report Tuesday showed the cost of goods and services rose 0.4% in February from January and 6% year on year, according to data from the Bureau of Labor Statistics. The probability that the Fed will raise rates by 25 basis points next week increased after the report’s release. The central bank is raising rates to combat soaring inflation.
About 53.1% of investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by 25 basis points at policymakers’ next meeting March 22 after the inflation report and the February jobs report, released Friday. The remaining 46.9% of investors are anticipating rates to remain unchanged. A week ago, 30.2% of investors were anticipating a 25 basis-point hike, with 69.8% predicting a 50 basis-point rise.
The Fed raised rates by 25 basis points Feb. 1 following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November to try to rein in skyrocketing inflation.
New regulatory measures in the wake of the Silicon Valley Bank collapse also helped shore up sentiment in the financial markets.
Silver May futures increased 0.5% Tuesday to settle at $22.04 an ounce on Comex, contributing to the front-month contract’s 7.5% rally the first two days of the week. Silver retreated 12% last month after falling 0.8% in January and rising 10% in December. It advanced 3% in 2022. The May contract is currently up $0.115 (+0.52%) an ounce to $22.155 and the DG spot price is $22.25.
Spot palladium gained 1.3% Tuesday to $1,538.50 an ounce and is up 11% so far this week. Palladium plummeted 14% in February after dropping 7.4% in January and retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is down $53.70 an ounce to $1499.00.
Spot platinum decreased 1.6% last week to $995.50 an ounce, though it gained 3% in the first two days of the week. Platinum retreated 5.9% in February after falling 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. The current DG spot price is down $35.50 and ounce to $964.00.
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