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Metals Stocks: Gold moves up as investors weigh a higher than expected U.S. inflation reading

Gold futures headed higher Thursday, shaking off earlier weakness after a reading on January U.S. inflation comes 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.

Gold moved lower shortly after the CPI data, but then gradually moved up, looking to stretch their streak of gains into a fifth session in a row.

Prices managed to find support at their 18-day moving average of $1,820, Peter Spina, president and chief executive officer at GoldSeek.com, 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.”

““There is simply too much buying in gold recently to get any sustained corrections.””

— Peter Spina, GoldSeek.com

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.”

April gold futures
GC00,
+0.02%

GCJ22,
+0.02%

rose $4.80, or 0.3%, to $1,841.40 an ounce on Comex, with most-active contract prices on track to mark another finish at the highest since Jan. 25, FactSet data show. March silver rose 34.4 cents, or 1.5%, to $23.685 an ounce.

Immediately following the inflation data, 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 10-year Treasury yield
TMUBMUSD10Y,
2.025%

touched highs above 2%, though The ICE U.S. Dollar index
DXY,
-0.14%

has eased back by 0.2% to 95.27, after trading as high as 96.

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.

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,
+1.16%

tacked on 1.5% to $4.674 a pound. April platinum
PLJ22,
+0.44%

added 1.7% to $1,055.10 an ounce, but March palladium
PAH22,
-0.55%

traded at $2,302.50 an ounce, up 0.8%.

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