The Wall Street Journal: Gold rallies in volatile trade after hotter-than-expected inflation reading

Gold futures rallied Wednesday in volatile trade after a hotter-than-expected headline inflation reading prompted investors to turn to the precious metal as a hedge against rising retail-level prices.

Gold had risen earlier and then fell sharply before bouncing back.

April gold GCJ8, +1.51% was recently up $20.30, or 1.5%, to $1,350.50 an ounce. The gold-backed exchange-traded fund SPDR Gold Shares GLD, +1.46% gained 1.3%, while the VanEck Vectors Gold Miners ETF GDX, +4.11% ) rose 3.9%.

The ICE U.S. Dollar Index DXY, -0.39% is off rose 0.4. Precious metals, which are often pegged to dollars, tend to rise when the buck weakens because a falling dollar can make buying those assets cheaper for investors using stronger monetary units.

The yield on 10-year Treasury notes TMUBMUSD10Y, +1.99% shot up to 2.882% after the data but was still trading below the four-year high of 2.891% hit Monday.

Rising yields, in theory, should detract from the appetite for gold because precious metals don’t bear a yield. However, rising inflation could also provide a lift for gold over the short term because it is often viewed as a hedge against rising prices. Gold had been improving over the last few days after the futures contract erased 1.6% last week in its worst performance in two months.

Read : This chart warns that the 30-year downtrend in interest rates may be over

The consumer-price index leaped 0.5% in January, the biggest increase in five months. Higher consumer prices in January, however, didn’t substantially alter the overall picture on inflation. The increase in the CPI over the past 12 months remained unchanged at 2.1%.

Still, ”the CPI report falls into the camp of the U.S. monetary-policy hawks, who would like to see the Federal Reserve raise interest rates at a faster pace, likely four small increases in 2018,” said Jim Wyckoff, senior analyst at metals trading firm Kitco.com.

After stripping out volatile gas and food, the more closely followed core rate of inflation rose 0.3% last month. The 12-month rate of core inflation was also flat at 1.8%. And importantly, inflation-adjusted U.S. wages declined by 0.2% in January. The Fed is closely watching wage-induced inflation risks.

“This data point will be closely watched to see if gold can hold $1,325 or goes in either direction sharply,” said Jeff Wright, chief investment officer at Wolfpack Capital.

Check out: MarketWatch’s Economic Calendar

U.S. stocks which had initially retreated following the CPI data recovered, setting the Dow on track for its fourth straight session of gains. Global equity markets have been recovering from their inflation-sparked selloff earlier this month.

Also potentially impacting stocks and the broader financial markets, sales at U.S. retailers fell by 0.3% in January — the biggest drop in almost a year — chiefly due to declines at auto dealers and home centers. And a previously reported increase in sales in December was wiped out.

“In this case [after the data], we could see a renewed wave of selling on the stock markets for fear that the Federal Reserve might raise interest rates faster and more sharply. This could spark a renewed flight into safe havens, which would benefit gold,” said Carsten Fritsch, commodities analyst at Commerzbank.

In other metals trading, March silver SIH8, +1.19% climbed 1.5% to $16.775 an ounce, while the silver-focused iShares Silver Trust SLV, +1.22% rose 1.3%. March copper HGH8, +2.04% gained 1.9% to $3.222 a pound, April platinum PLJ8, +2.02% added 2.2% to $997.50 an ounce and March palladium PAH8, +1.57% rose 1.7% to $997 an ounce.

Filed in: Top News Tags: 

You might like:

States that voted for Trump are more likely to have growing credit-card debt States that voted for Trump are more likely to have growing credit-card debt
CEO turnover is the highest it’s been in 8 years CEO turnover is the highest it’s been in 8 years
The depressing reason most Americans are making more money The depressing reason most Americans are making more money
Delta passengers were trapped on runway for 12 hours — but did they get compensation? Delta passengers were trapped on runway for 12 hours — but did they get compensation?
Did Kylie Jenner’s tweet really cause Snapchat stock to plunge $1.3 billion? 5 of the costliest tweets ever Did Kylie Jenner’s tweet really cause Snapchat stock to plunge $1.3 billion? 5 of the costliest tweets ever
Capitol Report: Schiff memo released challenging Republican allegations of government overreach related to Mueller probe Capitol Report: Schiff memo released challenging Republican allegations of government overreach related to Mueller probe
Hand-written Steve Jobs employment application — with a key misspelling — offered in pop-culture auction Hand-written Steve Jobs employment application — with a key misspelling — offered in pop-culture auction
NewsWatch: Here’s Warren Buffett’s ‘strongest argument’ against buying stocks with borrowed money NewsWatch: Here’s Warren Buffett’s ‘strongest argument’ against buying stocks with borrowed money

Leave a Reply

Submit Comment
© 2339 Stock Investors News. All rights reserved. XHTML / CSS Valid.