Gold flat early Friday but heading for a weekly dip after two key inflation reports released this week showed that U.S. inflation surged last month, weighing on the economy and hopes for a series of large interest rate cuts.
Prices also fell from records at the end of last week after U.S. President Donald Trump said early in the week that he wouldn’t impose tariffs on gold imports, reversing information from Customs and Border Protection.
December gold futures fell 0.7% Thursday to settle at $3,383.20 an ounce on Comex, and the front-month contract tumbled 3.1% in the first four days of the week. Bullion gained 1.2% in July after slipping 0.2% in June and losing 0.1% in May. It’s up 28% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The December contract is currently down $0.5 (-0.01%) an ounce to $3382.70 and the DG spot price is $3338.90.
Even if the Fed cuts rates in September, signs that inflation is rising will pressure the central bank not to reduce rates too precipitously. Higher interest rates typically weigh on gold, making the yellow metal a less attractive alternate investment. The Fed will have to balance the threat of inflation against signs that the labor market is losing some resilience, however.
Wholesale U.S. prices rose 0.9% in July, according to data out Thursday, a figure much higher than the 0.2% economists had forecast. It was the biggest month-on-month increase since June 2022. The core producer price index, which excludes volatile food and energy prices, gained 0.9% versus an estimate of 0.3%. On an annual basis, headline PPI rose 3.3%, well beyond the Fed’s 2% target.
More than 92% of the investors tracked by the CME FedWatch Tool are still betting that the Federal Reserve will cut rates next month. The Fed has held rates unchanged at 4.25% to 4.50% all year, including at policymakers’ most recent meeting at the end of July.
The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts last year.
Earlier this week, the consumer price index showed that core CPI increased at the fastest pace since January as the cost of services climbed. Monthly core CPI rose 0.3% from June, in line with forecasts, while on a year-on-year basis, it increased 3.1%, slightly more than economists’ estimates of 3%. Headline CPI gained 0.2% month on month, in line with estimates, and 2.7% year on year, slightly lower than the 2.8% consensus forecast.
The Fed has said it closely watches inflation and jobs data when determining monetary policy. On Thursday, U.S. weekly initial jobless claims fell by 3,000 to 224,000.
Front-month silver futures decreased 1.4% Thursday to settle at $38.07 an ounce on Comex, and the most-active September contract fell 1.2% in the first four days of the week. Silver rose 1.5% in July after increasing 9.5% in June and adding 0.6% in May. It rose 21% in 2024. The September contract is currently down $0.254 (-0.67%) an ounce to $37.815 and the DG spot price is $37.78.
Spot palladium rose 1.1% Thursday to $1,153.50 an ounce and is up 1.2% so far this week. Palladium climbed 8.8% in July after surging 14% in June and advancing 2.8% in May. Palladium dropped 17% last year. The DG Spot price is currently down $35.70 an ounce to $1117.00.
Spot platinum rallied 1.6% Thursday to $1,361.80 an ounce and is up 1.7% so far this week. It dropped 3.9% in July after climbing 27% in June and rising 8.6% in May. Platinum lost 8.4% in 2024. The current DG spot price is down $26.80 an ounce to $1334.70.
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