Gold prices on track for highest finish in a week after U.S. inflation data

Gold prices edged higher on Friday, on track to mark their highest finish in just over a week, after the U.S. November producer-price inflation came in slightly higher than expected.

Price action
  • February gold
    rose $10.10, or 0.6%, to trade at $1,811.60 per ounce on Comex, poised to end the week just around 0.1% higher. A finish around this level would be the highest for a most-active contract since Dec. 1, FactSet data show.

  • Silver for March delivery
    added 54.9 cents, or 2.4%, to $23.795 per ounce, with prices up more than 2% for the week.

  • March palladium prices
    climbed by $21.20, or 1.1%, to $1,952 per ounce, while January platinum
    added $13.50, or 1.3%, to $1,028.10 per ounce.

  • Copper prices for March
    rose less than a penny, or 0.2%, to $3.8905 per pound.

What’s happening

U.S. producer price inflation came in slightly stronger than expected in November, confounding the market’s expectations for a more pronounced drop after a promising moderation in the prior month’s data.

See: U.S. wholesale price inflation picks up in November, but is lower for year

But that didn’t happen, and gold prices eroded some of the earlier gains that lifted prices to as high as $1,819 an ounce.

“I’m amazed how many think that we’re just going to quickly go back to a pre-COVID environment with inflation and I just don’t see it, especially if one listens directly to what companies are saying,” said Peter Boockvar, chief investment officer of Bleakley Financial Group.

Separately, the University of Michigan’s gauge of consumer sentiment index rose to a preliminary December reading of 59.1. Economists polled by the Wall Street Journal had expected a December reading of 56.5. Inflation expectations over the next year, however, fell to 4.6% — the lowest since September 2021.

Read: World Gold Council outlines what’s in store for gold with the global economy at a ‘crossroads’

This week, gold prices saw a big drop on Monday but have “put together a nice string of gains” since, said Brien Lundin, editor of Gold Newsletter, adding that he believes “gold has shown signs of decoupling from the stock and bond markets.”

Metals had followed stocks and bonds higher on indications of dovish Fed policy, and “lower when the tea leaves have pointed toward more-hawkish policy,” Lundin told MarketWatch. Since the beginning of the month, however, the “rolling 20-day correlation between gold and U.S. stocks has dropped, and while it’s still early to say whether this trend persists, “it is interesting and something to watch.”

Longer term, Lundin said the recent rebound in gold “has legs to it and should combine with seasonality trends to build a price rally lasting well into the new year.”

A hike of “only” a half point in next week’s FOMC meeting has been “discounted” by the markets and should continue to provide tailwinds for gold, he added.

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