Traders buy Gold’s post rally dip this morning, returning the yellow metal to hover around the $1,720 mark. It had slipped overnight on profit taking after its biggest jump in two months on Tuesday.
Gold’s morning rise shrugged off the U.S. Consumer Price Index report for February that showed a rise of .04%, well in line with projections. This is however a solid gain for the CPI, leading to the biggest annual gain in a year, but underlying inflation remained muted due to sluggish demand for services such as airline travel.
Bullion continues to come under pressure from strong Treasury yields and a strong dollar, particularly on the back of the latest round of U.S. stimulus to prop up the economy. The U.S. House of Representatives is set to clear President Joe Biden’s $1.9 trillion pandemic relief bill on Wednesday, at which point it will only have to be signed into law by the president.
Treasury yields, gold and the dollar are all traditional hedges against inflation, which some economists are anticipating because of the massive stimulus measure. But Treasury yields and the dollar are receiving the bulk of that trade this year, and that’s pressuring gold. That’s because higher yields and a stronger dollar increase the opportunity cost of holding bullion.
April gold futures rose 2.3% Tuesday to settle at $1,716.90 an ounce on Comex, and the yellow metal is up 1.1% so far this week. Gold is down 0.7% so far this month after posting its worst month since 2016 in February. Gold climbed $372 — or 24% — in 2020 because of uncertainty about the economy and the pandemic. The April contract is currently down just $0.40 an ounce to $1,716.50 and the DG spot price is $1,719.80.
In addition to the U.S. stimulus measure — designed as a shot in the arm to the U.S. economy and labor force, which are still reeling from the coronavirus pandemic — the European Central Bank has a policy meeting scheduled for Thursday. Investors are closely watching to see whether policy makers will take any action to curtail the strength in Treasury yields, a move which could be bullish for gold.
Investors will also look to core U.S. inflation data on Wednesday and weekly initial jobless claims figures on Thursday for further indicators on the state of the economy one year after the pandemic began.
The COVID-19 virus has killed more than 2.61 million people worldwide and sickened more than 117.6 million. About 25% of the cases — and 20% of the deaths — are in the U.S. The country has more than 29 million cases, more than any other nation.
May silver futures increased 3.6% Tuesday to settle at $26.18 an ounce on Comex and are up 3.5% so far this week. The metal decreased 1.8% in February, its first retreat in three months. Silver gained 1.9% in January and 47% in 2020. The May contract is down a touch to $26.155 an ounce currently, while the DG spot price is $26.10.
Spot platinum gained 2.1% Tuesday to $1,179.90 an ounce and is up 3.8% in the first two days of this week. The metal rallied 11% in February amid forecasts for higher demand and tighter supplies. The autocatalyst metal advanced 0.5% in January and 11% in 2020. Currently, the DG spot price is up near $20 an ounce to $1,197.00.
Spot palladium decreased 0.6% Tuesday to $2,325.00 an ounce and is down 1.3% so far this week. It gained 4.9% in February after plummeting 9% in January and rallying 26% in 2020. The current DG spot price for palladium is down $10 to $2,311.00.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.