Gold futures extended their losses at the end of the holiday-shortened trading week. The yellow metal declined on a sizzling inflation report that sent the US dollar and Treasury yields higher amid growing expectations that the Federal Reserve will continue hiking interest rates heading into the summer.
April gold futures tumbled $7.90, or 0.43%, to $1,818.90 per ounce at 16:42 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold prices will finish the week down nearly 2%, adding to their year-to-date loss of 0.6%.
Silver, the sister commodity to gold, plummeted below the $21 mark to finish the week. April silver futures fell $0.461, or 2.16%, to $20.845 an ounce. The white metal recorded a weekly slide of 4%, bringing its year-to-date drop to nearly 14%.
Inflation was the talk of the town on Friday, as the Federal Reserve’s preferred inflation measurement came in hotter than anticipated.
The annualized Personal Consumption Expenditure (PCE) Price Index inched higher to 5.4% in January, up from 5.3% in December. This was higher than economists’ expectations of 4.8%. PCE prices surged 0.6% month-over-month, driven by higher services and energy costs.
The core PCE Price Index surged 0.6% last month, up from 0.4% in December. This also was higher than market forecasts of 0.4%. Core PCE prices edged up to 4.7% year-over-year, high than the market consensus of 4.3%.
Meanwhile, the University of Michigan’s inflation expectations for next year rose to 4.1% in February, up from 3.9% in January. The five-year outlook was unchanged at 2.9%.
In other economic data on Friday, the Bureau of Economic Analysis (BEA) reported that personal income and personal spending rose 0.6% and 1.8%, respectively. Building permits picked up 0.1% to 1.339 million units, while new home sales increased 7.2% to 670,000 units.
The sizzling inflation numbers rattled Wall Street, resulting in investors continuing to shift their expectations for interest rates.
The US Treasury market was up across the board, with the benchmark ten-year yield up more than nine basis points to 3.975%. The one-month bill jumped 3.3 basis points to 4.624%, while the 30-year bond swelled 8.2 basis points to 3.96%.
Gold is generally sensitive to rising interest rates because it can impact the opportunity cost of holding non-yielding bullion.
Still, the White House was optimistic about the PCE data, saying that the administration has “made progress on inflation.”
“Annual inflation in January is down from the summer, while the unemployment rate has remained at or near a 50-year low and take-home pay has gone up. We’ve also continued to make progress since the data in this report, with gas prices down again – now more than $1.60 since last summer’s peak after Putin’s unconscionable invasion,” President Joe Biden said in a statement.
Meanwhile, the US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, soared above 105.00 on Friday, recording a 1.3% weekly gain. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
In other metal markets, April copper futures plummeted $0.1065, or 2.62%, to $3.9525 a pound. April platinum futures cratered $36.40, or 3.85%, to $909.40 per ounce. April palladium futures crashed $56.20, or 3.93%, to 1,375.00 an ounce.