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Gold hits new record after inflation report

Monday, April 1, 2024

Gold hits new record after inflation report

Gold hits new record high after Friday’s inflation report, rallying early Monday on reinforced bets that the Federal Reserve will begin cutting interest rates in June.

Lower interest rates would be considered bullish for the yellow metal, making it a more attractive asset for investors. The Fed’s favorite inflation measure, the personal consumption expenditure price index, came out in line with expectations for February for so-called core PCE, which excludes volatile food and energy costs. The Commerce Department data was released Friday when most financial markets were closed for Good Friday. 

Core PCE increased 2.8% year on year and was up 0.3% from a month earlier. Including food and energy costs, PCE increased 2.5% year on year and 0.3% month on month, compared with estimates for 2.5% and 0.4%, respectively. The Fed’s series of interest rate cuts has targeted 2% inflation. 

Front-month gold futures rose 2.6% last week to settle at $2,238.40 an ounce on Comex after the most-active June contract gained 1.2% Thursday. Comex electronic trading didn’t settle Friday because of Good Friday. Bullion increased 8.9% in March – the biggest monthly rise in more than three years – after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The June contract is currently up $36.40 (+1.63%) an ounce to $2274.80 and the DG spot price is $2245.90.

About 92.7% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 7.3% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last month. Most investors are expecting a rate cut in June.

Fed policymakers reiterated last month that the central bank expects to cut interest rates three times this year. The Fed closely tracks both inflation and labor market data when determining monetary policy. 

The end of this week will bring the widely anticipated U.S. monthly jobs report for March. Fed Chairman Jerome Powell said after the Fed’s policy announcement last month that a surprise increase in unemployment could spur the Fed to cut rates. 

Front-month silver futures rose 0.3% last week to settle at $24.92 an ounce on Comex after the May contract advanced 0.7% Thursday. Silver gained 8.9% in March after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023. The May contract is currently up $0.519 (+2.08%) an ounce to $25.435 and the spot price is $25.20.

Spot palladium increased 2.5% last week to $1,027.50 an ounce after rising 3.2% Thursday. Palladium advanced 7.7% last month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. The current  spot price is down $18.00 to $1009.50.

Spot platinum gained 1.5% last week to $914.30 an ounce after advancing 1.1% Thursday. Platinum rose 3.3% last month after decreasing 4.9% in February and falling 8% in January. Platinum dropped 6.8% in 2023. The spot price is currently down $6.20 an ounce to $907.20.

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