Gold rises on this morning’s consumer price index report that showed softer inflation, lifting spot prices near the $2700 benchmark, as investors gain hope for another Fed rate cut.
Excluding volatile food and energy components, core consumer price index increased 3.2% on an annual basis, slightly less than the forecasted 3.3% rise, per the U.S. Bureau of Labor Statistics.The CPI increased a seasonally adjusted 0.4% on the month, putting the 12-month inflation rate at 2.9%, which is in line with forecasts. The dollar index eased 0.4%, making bullion more attractive while the benchmark 10-year Treasury yields also slipped.
The U.S. producer price index for December on Tuesday showed that wholesale prices rose less than expected last month. The Fed closely watches both inflation and labor market reports when setting interest rates. Higher interest rates are typically considered bearish for gold, because they make gold a less attractive alternate investment.
Front-month gold futures rose $4.30 Tuesday to settle at $2,682.30 an ounce on Comex, though the most-active February contract fell 1.2% in the first two days of the week. Bullion dropped 1.5% in December after losing 2.5% in November and rising 3.4% in October. The metal gained 27% in 2024, its biggest annual gain since 2010. Gold’s 2024 rally was spurred by the Fed, the economy and global central bank buying cycles. The February contract is currently up $21.90 (+0.82%) an ounce to $2704.20 and the DG spot price is $2681.80.
Wholesale prices rose 0.2% last month, according to data released Tuesday by the Bureau of Labor Statistics. That’s less than the 0.4% consensus estimate by economists and the 0.4% posted for November. Excluding volatile food and energy prices, core PPI was flat. It was forecast to rise 0.3%.
Investors will get an additional snapshot on the state of the economy later Wednesday, with the release of the Beige Book, the Fed’s report on economic conditions in each of its 12 districts. Both the inflation reports and the economic picture will give indicators on the central bank’s upcoming monetary policy decisions.
Fed policymakers are widely expected to keep interest rates unchanged at the end of this month after the U.S. monthly jobs report for December showed last week that payrolls rose much more than expected last month and the unemployment rate fell.
U.S. nonfarm payrolls surged by 256,000 last month, above the forecast for 155,000 and the 212,000 in November, according to data released Friday by the Labor Department. The unemployment rate slipped to 4.1%.
The Fed reduced its benchmark interest in September, November and December. It’s now at 4.25% to 4.50%. Previously, the central bank had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to combat inflation. More than 97% of the investors tracked by the CME FedWatch Tool are now betting that the Fed will keep rates unchanged at the end of this month. The rest expect another 25 basis point cut.
Front-month silver futures gained 4 cents Tuesday to $30.35 an ounce on Comex, though the most-active March contract declined 3.1% in the first two days of the week. Silver dropped 6% in December after falling 5.1% in November and advancing 4.3% in October. It gained 21% in 2024. The March contract is currently up $0.794 (+2.62%) an ounce to $31.145 and the DG spot price is $30.38.
Spot palladium lost 50 cents Tuesday to $953.00 an ounce. It decreased 0.6% so far this week. Palladium fell 6.7% in December after sliding 12% in November and increasing 11% in October. Palladium dropped 17% last year. Currently, the DG spot price is up $18.70 an ounce to $966.00.
Spot platinum fell 1.7% Tuesday to $946.50 an ounce and is down 2.3% this week. Platinum lost 4.6% last month after declining 4.2% in November and rising 1.5% in October. Platinum slid 8.4% in 2024. The DG spot price is currently down $5.30 an ounce to $939.70.
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