Gold trades near 9-month high as U.S. wholesale inflation and retail sales fall

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Gold prices touched their highest intraday levels since early April on Wednesday, as investors digested another batch of U.S. economic data showing wholesale inflation and retail sales both slowed in December.

Price action
  • Gold futures for February
    GC00,
    +0.16%

    GCG23,
    +0.16%

    delivery gained $10.50, or 0.6%, to $1,920.40 per ounce on Comex. It traded as high as $1,929.80, the highest intraday price for a most-active contract since April 25, FactSet data show.

  • Silver futures for March delivery
    SI00,
    -0.07%

    SIH23,
    -0.07%

    increased by 18.2 cents, or 0.8%, to $24.25 per ounce.

  • Palladium for March
    PAH23,
    +0.78%

    advanced $40, or 2.3%, to $1,774 per ounce, while April platinum
    PLJ23,
    +1.99%

    rose by $31.90, or 3.1%, to $1,078.80 per ounce.

  • Copper for March
    HG00,
    +1.89%

    HGH23,
    +1.89%

    delivery climbed by 10.8 cents, or 2.6%, to $4.3315 per pound.

Market drivers

U.S. economic data released on Wednesday helped push gold higher by showing surprising weakness in the strength of the U.S. consumer, while adding more evidence that inflation has continued to slow.

U.S. wholesale prices sank 0.5% in December, extending a string of low readings. while U.S. retail sales fell 1.1% in December, according to government figures, compared with forecasts for a 1% fall. Even when excluding automobiles, sales still declined by 1.1%, compared with expectations for a 0.5% decline.

MarketWatch Live: Dow futures add to modest rise after retail sales, PPI data

The takeaway is that inflation is slowing along with the pace of economic growth, which undermines hopes for a soft-landing in the U.S. despite earlier signs that its economy finished 2022 in better-than-expected shape.

“The data has supported the gold price as traders believe that the Fed is unlikely to adopt a hawkish policy in the face of a weak economy,” said Naeem Aslam, chief market analyst at Avatrade, in a note to reporters.

Early Wednesday, a dovish policy stance by the Bank of Japan had “clipped” the Japanese yen against the U.S. dollar initially, but the yen has since recovered, said Edward Meir, founder of Commodity Research Group, in commentary written for Marex.

Japan’s central bank kept its rate target intact by a unanimous vote and made no change to forward guidance, triggering the earlier selling” in the yen, he said.

However, the ICE U.S. Dollar index
DXY,
-0.39%

was down 0.6% at 101.82 in Wednesday dealings, accelerating its decline since the PPI reading, said Meir. A weaker dollar is supportive for dollar-denominated precious-metals prices.  



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