Gold futures settled Wednesday at their highest in nearly a week, as the dollar declined on the back of U.S. data showing a smaller-than-expected rise in March consumer prices and a slowdown in the yearly rate of inflation.
Following the session’s settlement, futures prices for the precious metal edged higher in electronic trading following the release of minutes from the March Federal Open Market Committee meeting.
Price action
-
Gold for June delivery
GCM23,
+1.50%
climbed $5.90, or 0.3%, to settle at $2,024.90 an ounce on Comex, the highest most-active contract finish since April 6, FactSet data show. -
May silver
SIK23,
+1.85%SI00,
+1.85%
settled at $25.46 an ounce, up 27 cents, or 1.1%. -
July platinum
PLN23,
+2.00%
gained 2.2% to $1,027.50 an ounce, while June palladium
PAM23,
+0.69%
added nearly 0.9% to $1,455.90 an ounce. -
May copper
HGK23,
+1.14%
tacked on 1.5% to $4.08 a pound.
Market drivers
U.S. consumer prices edged up by 0.1% in March largely because of lower energy costs, compared with a 0.2% increase forecast by economists polled by the Wall Street Journal. The yearly rate of inflation slowed to 5% from 6% and touched the lowest level since May 2021.
The so-called core rate of inflation that omits food and energy rose 0.4%, in line with a Wall Street forecast.
The data has confirmed that the Federal Reserve “doesn’t need to work as hard as they have” to tame inflation and that the “time has come to ease off on increasing the interest rate,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.
“We are going to hear a lot of commotion about the Fed’s next move, and odds are that the Fed will confess that inflation has slowed and that they may halt their hike cycle,” he said in a market update.
Still, gold futures ended Wednesday off the session highs, as Richmond Fed President Tom Barkin said there is “more to do to get core inflation back down” to where the Fed would like it to be. His comments appeared to raise the possibility for more interest-rate hikes ahead.
Gold futures moved higher to trade at $2,027.50 in electronic trading Wednesday afternoon. Minutes from the FOMC’s March meeting, released after the gold futures settlement showed that Fed officials considered whether a pause in interest-rate hikes would be appropriate, with stress in the banking sector expected to slow U.S. economic growth.
So far in 2023, gold has climbed by around 9%, bolstered by a retreat in Treasury yields and the U.S. dollar. Falling yields lower the opportunity cost of holding nonyielding assets, while a weaker dollar makes assets priced in the unit less expensive to users of other currencies.
The U.S. dollar has declined in the wake of the CPI data, with the ICE U.S. Dollar index
DXY,
-0.53%
losing 0.7% to 101.51.
Gold may also be finding support from “foreign demand as investors seek safe havens as the European Central Bank continues to battle elevated inflation, and as China reopens and savers seek to shift savings from housing toward alternatives such as gold,” said Rob Haworth, senior investment strategist at U.S. Bank Asset Management.
“However, softer global economic activity and weaker trends in U.S. growth likely temper demand for gold over the next quarter,” he said.
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