Precious Metals Settle Mixed As A Jump In U.S. Consumer Prices Boosts Gold

Rich Asplund - Barchart - Tue Jul 13, 1:50PM CDT

August gold (GCQ21) on Tuesday closed up +4.00 (+0.22%), and Sep silver (SIU21) closed down -0.099 (-0.38%).

Gold and silver prices on Tuesday settled mixed. Gold moved higher Tuesday after U.S. consumer prices accelerated more than expected, which spurred demand for gold as an inflation hedge. Also, concern about the worldwide spread of the delta Covid variant is boosting safe-haven demand for precious metals. However, precious metals prices were undercut by dollar strength and hawkish Fed comments.

A jump in U.S consumer prices was bullish for gold after the U.S. June CPI rose +0.9% m/m and +5.4% y/y, stronger than expectations of +0.5% m/m and +4.9% y/y. The +5.4% y/y gain was the largest in nearly 13 years. Also, the June core CPI rose +0.9% m/m and +4.5% y/y, stronger than expectations of +0.4% m/m and +4.0% y/y. The +4.5% y/y gain was the largest in nearly 30 years.

An increase in U.S. inflation expectations is supportive for gold demand as an inflation hedge after the 10-year breakeven inflation rate on Tuesday climbed to a 3-1/2 week high of 2.380%.

Gold has underlying support from the Covid pandemic, which is dovish for central bank policies. The spread of the delta Covid variant worldwide has forced renewed lockdowns across parts of Asia and Australia. Also, the infection rate in the U.S. has increased after the 7-day average of new U.S. Covid infections rose to a 1-1/2 month high Monday of 23,346. Globally, Covid infections now stand at 188.246 million, with deaths climbing above 4.058 million.

Hawkish Fed comments on Tuesday were bearish for precious metals. St. Louis Fed President Bullard said there is "no good reason" for the Fed to keep aiding the housing market, and the time is right to pull back on Fed stimulus. Also, San Francisco Fed President Daly said she is "bullish" about the U.S. economy going into the fall and "it's appropriate to start talking about tapering our asset purchases."

Stronger-than-expected Chinese trade data is positive for global growth prospects and silver prices but bearish for gold. China Jun exports rose +32.2% y/y, stronger than expectations of +23.0% y/y. Also, China Jun imports rose +36.7% y/y, stronger than expectations of +29.5% y/y.

Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. Long gold positions in ETFs rose to a 3-1/2 month high of 3,149.78 metric tons on Jun 18, moderately below last October's record high of 3,459.8 metric tons (data since 2002). Long silver positions in ETFs soared to a record high on Feb 2 of 1.017 billion troy ounces (data from 1990) but have since fallen back and fell to a 5-1/2 month low Monday.
Precious Metals Settle Mixed As A Jump In U.S. Consumer Prices Boosts Gold (barchart.com)