Metals Stocks: Gold heads for first decline in 5 sessions after higher than expected U.S. inflation reading

Gold futures declined on Thursday, heading for their first loss in five sessions, after a reading on January U.S. inflation came in higher than expected, raising the prospects for aggressive interest rate hikes from the Federal Reserve.

The consumer price index rose 0.6% in January to 7.5%, holding ground at a 40-year high. The 7.5% surge in the cost of living in the past 12 months is the biggest since February 1982.

Against that backdrop, the U.S. dollar was “injected with renewed confidence, while Treasury yields climbed,” Lukman Otunuga, manager, market analysis at FXTM, told MarketWatch, pressuring prices for haven gold. The ICE U.S. Dollar index DXY, +0.05% was up 0.3%, while 10-year Treasury yields TMUBMUSD10Y, 1.991% touched 2%.

The inflation data “certainly raises the prospects of the [Fed] raising interesting rates aggressively to battle inflation, a move that will most likely punish zero-yielding assets like gold,” said Otunuga.

“Bears remain on the prowl and could be waiting for the right opportunity to pounce, which could send the precious metal tumbling back towards the $1,800 level and lower in the short to medium term,” he said.

April gold futures GC00, +0.01% GCJ22, +0.01% fell $3.80, or 0.2%, to $1,832.80 an ounce on Comex, after ending Wednesday at a two-week high. March silver rose 8.4 cents, or 0.4%, to $23.425 an ounce.

Despite the price decline, gold futures managed to find support at their 18-day moving average of $1,820, Peter Spina, president and chief executive officer at, told MarketWatch.

“There is simply too much buying in gold recently to get any sustained corrections,” he said. “Gold simply is refusing to fall below $1,800.”

Spina also said “reported ‘whale’ buying up physical under $1,800,” which he believes to be the Russians — specifically the Russian National Wealth Fund.

He said Bloomberg reports that the rise in crude oil prices may create a windfall gain for Russia in 2022 of about $65 to $73 billion dollars with oil at $90 to $100. The law “requires that the vast majority of these funds to be invested into a rebalanced portfolio,” said Spina.

“It is my belief that the big buyer in gold is this fund, which is a reflection of the strong tradition of gold demand flow from oil profits,” he said. “These very high oil prices will only add more fuel to the gold demand story in the coming year.”

Read: High inflation has jacked up the cost of food, gas, cars and rent – and there’s little relief in sight

In other metals trading on Comex, March copper HGH22, +1.94% tacked on 1.6% to $4.675 a pound. April platinum PLJ22, +0.17% shed 0.1% to $1,036.10 an ounce, but March palladium PAH22, +1.51% traded at $2,318 an ounce, up 1.4%.

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