Goldworking to hold above the $1700 line after dipping below that mark on Tuesday following an unexpectedly large inflation figure for August which sent the broader market tumbling and boosted speculation of a hefty interest rate hike next week by the Federal Reserve. The bullion getting a boost on Wednesday from a weakened dollar.
The yellow metal shrugged off this morning’s inflation data. The producer price index, a gauge of prices received at the wholesale level, declined 0.1%, in line with expectations. The year-over-year PPI increased 8.7%, the lowest increase since August 2021.
The U.S. consumer price index rose 0.1% in August from July, according to Labor Department data, stymying hopes that a series of rate hikes was starting to turn the tide from inflation already at 40-year highs. The CPI had showed no change the prior month. It climbed 8.3% from a year earlier, a slight slowdown, but so-called core CPI, which strips out volatile energy and food costs, showed the first acceleration in six months.
Equities and gold tumbled amid mounting investor concern that the Fed will have to act even more aggressively than anticipated to rein in inflation and that could be detrimental for economic growth. Fed policymakers had indicated that the inflation report, examined in conjunction with recent positive employment and consumer spending data, would be likely to shape their next moves.
Front-month gold futures tumbled 1.3% Tuesday to settle at $1,717.40 an ounce on Comex. The December contract has declined 0.7% this week. Bullion dropped 3.1% in August after declining 1.4% in July. The metal retreated 3.5% in 2021. Currently, the December contract is down $3.20 (-0.19%) an ounce to $1714.20 and the DG spot price is $1706.60.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund fell 0.21% Tuesday to 962.88 metric tons from Monday’s 964.91 metric tons, Reuters reported.
The dollar index recorded its biggest one-day percentage gain since March 2020 on Tuesday, pressuring gold prices and helping fuel equities’ slide. The dollar was already near 20-year highs. A weaker dollar makes gold more attractive as an alternate investment.
The Dow Jones Industrial Average tumbled 1,2000 points, or 3.9% Tuesday in its worst day since June 2020, reaching 31,104.97. The S&P 500 Index plummeted 4.3% to 3,932.69.
Investors are betting there’s a 100% chance of an increase of 75 to 100 basis points Sept. 21, according the CME FedWatch Tool. None were predicting a 100 basis point hike before the inflation report came out, and 55% had anticipated only a 50-basis-point increase a month ago.
The Fed raised rates by 75 basis points each in June and July and has increased rates by 225 basis points this year to combat surging inflation. While gold is a traditional hedge against inflation, the anticipated rate increases in response to it are bearish.
Front-month silver futures dropped 1.9% Tuesday to settle at $19.49 an ounce on Comex, though the December contract is up 3.9% in the first two days of the week after a large rally Monday. Silver tumbled 12% last month after slipping 0.8% in July. It retreated 12% in 2021. Silver prices are tied to industrial demand. The December contract is currently up $0.014 (+0.07%) an ounce to $19.505 and the DG spot price is $19.65.
Spot palladium decreased 6.3% Tuesday to $2,150.50 an ounce. It’s down 2.6% so far this week. Palladium retreated 3.3% in August after rising 9.9% in July. It dropped 22% in 2021. Currently, the DG spot price is up $17.90 an ounce to $2154.00.
Spot platinum dropped 1.6% Tuesday to $901.60 an ounce, though it’s up 1.1% this week. Platinum tumbled 6.1% in August after decreasing 0.3% in July. It fell 9.4% last year. The DG spot price is currently up $21.30 an ounce to $919.00.
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