Gold prices on Tuesday logged their largest one-day gain in a week as the U.S. dollar softened and President Donald Trump Secretary of State Rex Tillerson was replaced by Mike Pompeo, current director of the Central Intelligence Agency, helping to boost haven demand for the yellow metal.
The greenback had given up an earlier advance when a reading on U.S. consumer-level inflation came in largely as expected and tempered expectations that the Federal Reserve could turn more aggressive with interest-rate moves this year.
April gold
GCJ8, +0.47%
rose $6.30, or 0.5%, to settle at $1,327.10 an ounce after tapping an earlier low of $1,313.80. That was the biggest single session dollar and percentage rise since March 6 and highest settlement since March 7, FactSet data show.
News that Tillerson is out as U.S. Secretary of State, a more high-profile turnover in the Trump administration, appeared to have lifted the haven allure of gold and silver, said Jim Wyckoff, senior analyst at metals firm Kitco.com.
Against this backdrop, the ICE U.S. Dollar Index
DXY, -0.28%
fell 0.2% to 89.69, raising its month-to-date decline to roughly 1%.
Read: Here’s the ideal amount of gold to keep in your investment portfolio
The inverse relationship between gold and dollar remains strong, said David Madden, market analyst at CMC Markets. “Overall, volatility in the gold market has been low. The metal has been in a downward trend since late January, and with the possibility of an interest-rate increase from the Federal Reserve this month, we could see continued pressure on the commodity.”
As for economic data, the U.S. consumer-price index rose a mild 0.2% in February after a worrisome 0.5% increase in the first month of the year. The gain was largely in line with Wall Street expectations. The gain nudged the yearly rate up to 2.2%, only a tick higher than a MarketWatch survey of economists expected.
“Inflation readings from the world’s major economies have been creeping up recently, which has caused a bit of concern among traders and investors,” said Wyckoff. “However, with most of the world inflation data being reported near or just above a 2.0% rise recently, most agree there is no cause for alarm.”
Gold had softened and the dollar gained as markets braced for a stronger-than-expected inflation number that could have nudged the central bank closer to four hikes instead of the three that the Federal Reserve has tentatively worked into its plans. The Fed is expected to increase interest rates in March, but the jury out on how aggressively it will act beyond that. For this reason, investors have become hypersensitive to inflation data.
Plus: Inflation is rattling markets—here’s what you should know about consumer prices
Rising inflation could add pressure on the Fed to speed up its rate rises, which could lift the dollar, though strangle the stock market. Gold, in turn, although negatively affected by higher interest rates, could attract hedging demand against too-hot inflation.
As for other metals, May silver
SIK8, +0.45%
rose 9.1 cents, or 0.6%, to $16.627 an ounce.
Net long positions in U.S. silver futures increased for the first time since January, UBS analyst Joni Teves said in a note.
“Silver has been such an underperformer of late and one of the few positive factors currently is that net length is very lean. Despite recent gains, net speculative positions in silver are still only 18% of the record,” she said.
Read: Silver is poised to outpace gold this year
Among exchange-traded funds, the silver-focused exchange-traded iShares Silver Trust
SLV, +0.29%
traded up 0.3% and the SPDR Gold Shares
GLD, +0.25%
climbed 0.3%. The VanEck Vectors Gold Miners ETF
GDX, -0.13%
fell 0.2%.
May copper
HGK8, +0.42%
settled up 0.5% at $3.138 a pound. April platinum
PLJ8, +0.54%
rose 0.5% to $967.30 an ounce and June palladium
PAM8, +2.31%
added 2.5% to $991.60 an ounce.
Source : MTV
