Gold futures rose on Wednesday as the US dollar and Treasury yields fell on stronger-than-expected US consumer inflation data, providing support to trade at their highest level in a week.
Consumer prices rose 0.5% in December to push growth in the cost of living last year to a nearly 40-year high of 7%, indicating that high US inflation continues well into 2022. likely to live.
The consumer-price index gained more than the 0.4% forecast of economists polled by The Wall Street Journal. The data also reinforces the view that inflation is operating well above the Federal Reserve’s annual target of 2%.
Following the data, the US dollar fell against most currencies and US benchmark stock indices were trading higher. Fawad Razakzada, Market Analyst, ThinkMarkets, said, “It seems that the market had prepared for even hotter inflation, which apparently did not materialise. “So the response can best be described as relief.”
Concerns about a rise in inflation, partly due to supply-chain constraints and greater volatility in demand, have helped support prices of precious metals such as gold and silver in the near term.
Following the CPI numbers, the US Dollar, the ICE US Dollar Index based on DXY,
Dollar denominated gold traded down 0.4% at 95.211, propelling gold prices. 10 Year Treasury Note TMUBMUSD10Y,
Traded at 1.733, down 1.745% at 3 p.m. Eastern Time on Tuesday, adding to the investment appeal for gold, which offers no yield.
The dollar weakened on Tuesday, as markets absorbed Federal Reserve Chairman Jerome Powell’s comments during a confirmation hearing for a second four-year term.
Jeff Wright, chief investment officer at Wolfpack Capital, referred to Powell’s comments, saying, “No fireworks, but dovish and no surprises.” It is “very clear that the votes to confirm have already been counted and that their confirmation is a foregone conclusion.”
“Gold has done well with Powell’s ‘go slow’ management of the Fed,” he told Businesshala.
However, Wright said he sees an uptick in asset buying and the possibility of a quantitative tightening on the horizon, “both of which would halt any gold rally.”
In Wednesday’s deal, February gold GCG22,
It rose $4.60, or about 0.3%, to $1,823.10 an ounce, after gaining 1.1% on Tuesday. Prices for the most active contract are trading at their highest level since January 5 and are on track for a fourth straight session of gains, FactSet data show, the longest string of gains since the seven-session stretch ended November 12.
Meanwhile, March silver SIH22,
was trading 30.3 cents, or 1.3% down, at $23.115 an ounce, after rising 1.6% in the previous session.
Powell said that while gold prices continued to rise on Tuesday, economic expansion should not be hurt by the central bank’s plan to raise interest rates, essentially painting a picture of a “soft landing” rather than a slowdown.
In his remarks Tuesday, Powell also said it would be a “long road” to policy normalization, which “offsets the more flamboyant tenor of the recently released FOMC minutes,” said Zener Metals vice president and senior executive. Metals strategist Peter Grant said. ,
“He also said that it may take up to four meetings to work out the parameters of balance sheet runoff. This will take us into June,” Grant told Businesshala late Tuesday. “The Fed must tread carefully, tightening enough to contain inflation, but not so quickly that a weak labor market is adversely affected.”
“In my opinion, the Fed considers full-employment to be the more important of its two mandates,” he said. “They will be more cautious this year than can be contained within minutes.”
In other COMEX trading, March Copper HGH22,
up 3% to $4.563 a pound. April Platinum PLJ22,
up 0.8% to $981.40 an ounce and March palladium PAH22,
traded up 1.3% at $1,946.50 an ounce.