Gold Hanging Tough

Gold Hanging Tough

Gold hanging tough this morning after losing a bit of its virus fear shine overnight. The yellow metal shrugged off expected inflation numbers.

The Department of Commerce reports its Core Personal Consumption Expenditures Index increased 0.2% in December which was inline with analysts’ predictions. Annual core inflation rose 1.6%, a slight bump up from November’s annual reading of 1.5%.

Gold had slipped late Thursday while equities rallied on the indication that the effect on the global economy might be minimal, even though many governments, airlines and businesses have already imposed travel restrictions. At the same time, the World Health Organization declared a global health emergency.

The coronavirus, first detected in Wuhan, China, has killed at least 213 people and has sickened 10,000 around the world as of early Friday. The U.S. Centers for Disease Control confirmed the country’s first case of human-to-human transmission of the virus on Thursday, and the U.S. and Japan warned their citizens against travel to China.

Investors often turn to safe-haven investments like gold in times of global or economic uncertainty, and reports of the disease sent futures climbing, including Thursday. Bloomberg reporting a quote from analysts led by Valentin Marinov, head of G-10 currency research at Credit Agricole CIB Global Markets. “The coming days could test investors’ risk appetite to the fullest. We suspect that those dipping their toes back into risky assets are running the risk that the coronavirus outbreak could prove more persistent and thus have a greater negative growth impact than expected.”

Front-month gold futures rose 0.8% Thursday to settle at $1,589.20 an ounce on Comex. The April contract was up 0.7% in the first four days of the week. Futures were up 4.3% this month through Thursday, heading for the best monthly performance in five. Currently, the April contract is at $1,587.70.

“There is likely to be some disruption to activity in China and globally,” Federal Reserve Chairman Jerome Powell said Wednesday at a news conference following the first monetary-policy meeting of 2020. “It’s very uncertain how far it will spread and what the (economic) effects will be in China, for its trading partners, and around the world…We are very carefully monitoring the situation.”

The Fed left interest rates unchanged at the meeting and Powell said the economic outlook had been brightening in recent months, before the onset of the coronavirus. Still, “there are signs and reasons to expect” a global economic rebound, he said.

In economic news Thursday, U.S. GDP rose by 2.1% in the fourth quarter, the same rate as in the third quarter, according to government estimates. Economists had expected 2% growth, according to Business Insider. The report showed that the economy has now expanded for a record 11 years, though full-year growth was 2.3%, short of the 3% target set by the Trump administration. New U.S. applications for unemployment benefits slipped by 7,000 to 216,000 in the week ended Jan. 25, according to Labor Department data.

Silver rallied 2.9% Thursday to settle at $17.99 an ounce on Comex. The March futures contract fell 0.7% in the first four days of this week and was up 0.4% for the month, lagging gold. Spot palladium, a metal used primarily in autocatalysts, was little changed Thursday. It’s down 5.2% so far this week but still up 18% for January amid a global supply crunch. Spot platinum rose 0.2% Thursday and is down 2.7% so far this week. It’s still up 1.3% this month.


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