Gold futures ended higher on Tuesday, finding support as the U.S. dollar weakened after a report showing U.S. inflation rose in August at the slowest pace in seven months.

The consumer-price index climbed 0.3% in August,  compared to a rise of 0.5% in July, the government said Tuesday. Economists polled by the Wall Street Journal estimated the cost of living, as measured by CPI, rose 0.4% in August.

The lower-than-expected consumer price index number has resulted in a weaker U.S. dollar, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. That supports dollar-denominated gold prices.

The data also eased expectations for an early taper by the Federal Reserve, he said.

“Every U.S. economic data release is important as traders will use it to judge the strength for next quarter,” said Karnani, adding that Thursday’s U.S. August retail sale numbers will impact gold’s price, as well as the U.S. dollar index.

“Traders are looking at clues for trends in the U.S. economy in the final quarter of the year,” and making readjustments to their fourth quarter portfolio based on incoming U.S. economic data releases, he said.

Against that backdrop, December gold
GCZ21,
+0.77%

GC00,
+0.77%

rose $12.70, or 0.7%, to settle at $1,807.10 an ounce, reversing course from an earlier drop to as low as $1,780.60. The settlement marked the highest for a most-active contract since Sept. 3, FactSet data show.

In addition to the CPI data itself, the Fed next week will likely use inputs, including the CPI report, to determine its plans for scaling back COVID-era bond purchases which have been in force to help provide liquidity to markets that were gummed up during the worst of the pandemic in the spring of 2020.

“The yellow metal will remain sensitive to US economic releases this week, especially today’s inflation reading, with any delay to tapering being a positive catalyst in the coming weeks,” wrote Craig Erlam, senior market analyst at Oanda Corp., in a research note.

Many members of the interest rate-setting Federal Open Market Committee, including Chairman Jerome Powell, have recently said that the central bank should announce tapering of its monthly purchases of $120 billion in Treasurys and mortgage-backed securities by the end of the year if the economy continues to recover from COVID.

December silver
SIZ21,
+0.71%

 
SI00,
+0.71%

settled up by 0.4% at nearly $23.89 an ounce, reversing a sharp loss from earlier in the session. December copper
HGZ21,
-1.09%
,
however, edged down by 1.1% to $4.32 a pound.

Palladium , meanwhile, saw the biggest move among the Comex metals, with prices down by 5%, logging a sixth straight decline and lowest finish since July 2020.

Both platinum and palladium are getting “hit hard yet again,” said Edward Meir, analyst at ED&F Man Capital Markets, in a Tuesday note. “The ongoing difficulties by automobile producers are surely weighing on both these complexes.”

The auto industry has taken a hit as a global shortage of computer chips leads to a slowdown in manufacturing, which in turn weakens demand for metals used to make cars, including palladium. The metal is mainly used in catalytic converters in gasoline-powered vehicles to help control emissions.

Read more: Palladium prices drop to their lowest in more than a year

On Tuesday, December palladium PA00 PAZ21 lost $104.20, or 5%, to settle at $1,975.60 an ounce. Palladium is down nearly 34% from its early May peak.

The most-active October platinum contract
PLV21,
-1.93%

declined $18.80, or 2%, to $938.70 an ounce.

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