Gold Rises to Another Record as Traders Take Comfort in US PPI

Gold climbed to a fresh record after the latest US inflation report offered some calm to markets a day after a hot price reading curbed bets on Federal Reserve rate cuts.

Bloomberg
First Published12 Apr 2024
Gold Rises to Another Record as Traders Take Comfort in US PPI
Gold Rises to Another Record as Traders Take Comfort in US PPI

(Bloomberg) -- Gold climbed to a fresh record after the latest US inflation report offered some calm to markets a day after a hot price reading curbed bets on Federal Reserve rate cuts.

The March producer price index for final demand rose 2.1% from a year earlier, Labor Department data showed Thursday. That’s the most in 11 months, but below the 2.2% analyst estimate. The PPI print along with the hot consumer inflation report Wednesday underpinned the bumpy path the Federal Reserve faces in achieving its 2% target.

Still, the details in the PPI report offered some calm for investors worried about a re-acceleration of inflation. Several categories used to inform the Fed’s preferred inflation measure — the personal consumption expenditures price gauge — such as health care and portfolio management, came in softer.

Read More: Fed’s Main Inflation Gauge Set to ‘Calm Some Nerves’ After CPI

“The PPI is enough to provide some relief to the hot CPI print yesterday,” said Nicky Shiels, head of metals strategy at Geneva-based MKS PAMP SA. “Overall, US bonds are trading as though Fed rate hikes are coming while gold is trading as though the Fed remains in rate cutting mode, so any dovish print going forward is fuel to accelerate the established bull trend.”

Bullion rose as much as 1.9% to $2,377.75 an ounce on Thursday, surpassing a peak reached on Tuesday. It has climbed 15% so far this year, exceeding the 13% gain registered in all of 2023. The rally has left some onlookers puzzled because of the lack of any obvious triggers — especially as convictions on three quarter-point rate cuts faded fast. 

Heightened geopolitical risks in the Middle East and Ukraine, plus buying by central banks, led by China, have added some bullish momentum for the precious metal.

Gold’s strength is also partly underpinned by “strong appetite from investors that are not interest-rate funding sensitive, those looking for a hedge against” risks in the financial markets, said Ole Hansen, head of commodity strategy at Saxo Bank AS.

Read more: Gold’s Rapid Ascent Isn’t Over Yet, Fund Managers Say

Spot gold rose 1.9% to $2,377.09 an ounce at 4:49 p.m. in New York. The Bloomberg Dollar Spot Index was little changed. Silver and platinum advanced, while palladium was steady. 

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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