Gold futures suffered sharp losses on Tuesday following a hotter-than-expected inflation report. The yellow metal had enjoyed seven straight record high finishes, but gold prices are now on track for their first loss since early in the month on monetary policy concerns.
April gold futures fell $21.80, or 1.00%, to $2,166.80 per ounce at 14:50 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. Gold prices are up about 4.5% year-to-date.
Silver, the sister commodity to gold, slumped toward $24. April silver futures tumbled $0.325, or 1.31%, to $24.39 an ounce. The white metal is up roughly 1.5% year-to-date.
The main event of the day was the February Consumer Price Index (CPI) report.
According to the Bureau of Labor Statistics (BLS), the US annual inflation rate rose to 3.2% in February, up from 3.1% in January. This also topped the consensus estimate of 3.1%. On a monthly basis, the CPI rose at a higher-than-expected pace of 0.4%.
Core inflation, which strips the volatile food and energy components, eased to a higher-than-expected rate of 3.8%. The core CPI also jumped at a hotter-than-expected pace of 0.4%.
Despite the disappointing inflation report, the financial markets were up, with the leading benchmark indexes rising as much as 1.3%. Market analysts say that investors were relieved that it was not higher.
The next pieces of significant data this week will be the producer price index (PPI) and retail sales.
In the meantime, gold prices were impacted by a stronger greenback as the US Dollar Index (DXY) surged 0.22% to 103.10, from an opening of 102.82. The index, a gauge of the buck against a basket of currencies, is up nearly 2% year-to-date.
A strengthening buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
In addition, US Treasury yields were up across the board, with the benchmark ten-year yield adding 4.3 basis points to 4.147%. The two-year yield jumped 5.9 basis points to 4.593%, while the 30-year bond swelled 3.3 basis points to 4.308%.
Gold is sensitive to fluctuations in interest rates because it influences the opportunity cost of holding non-yielding bullion.
The concern is that a blend of stronger economic data and abysmal inflation numbers could allow the Federal Reserve to delay its first rate cut in the current cycle. There is growing rumblings that the central bank could refrain from cutting rates this year.
In other metal markets, April copper futures slumped $0.0195, or 0.5%, to $3.909 per pound. April platinum futures shed $16.60, or 1.77%, to $923.90 an ounce. April palladium futures dipped $5.50, or 0.53%, to $1,036.50 an ounce.