Gold Prices Continue to Rise, Poised for Strong Week Amid Easing Inflation Concerns.
- Gold prices rose for the fourth consecutive session on Friday, supported by evidence that U.S. inflation was easing and concerns about a possible recession in 2023. On Thursday, data showed that U.S. producer price index inflation grew at a slower pace in March, which was followed by data showing that consumer price inflation also eased. These readings reinforced the belief that inflation was subsiding, which could result in a less hawkish Federal Reserve.
- Following the data, the dollar declined to a nearly one-year low, while Treasury yields also retreated, both of which supported gold prices. The safe-haven appeal of gold was also bolstered by several warnings of a U.S. recession this year, which could lead to less hawkish action by the Fed.
- As of 22:16 ET (02:16 GMT), spot gold rose 0.3% to $2,046.61 an ounce, while gold futures gained 0.3% to $2,060.75 an ounce. Both instruments were poised for a fourth straight day of gains and were headed for a weekly increase of nearly 2% each.
- Gold has been on a surge over the last month, driven by safe-haven flows triggered initially by fears of a banking crisis. While regulatory intervention helped to ease concerns of a broader crisis, the collapse of several U.S. banks led to the pricing in of a less hawkish stance by the Fed and a potential recession this year due to economic pressure from high-interest rates.
According to Fed Fund futures prices, markets are anticipating one more rate hike by the Fed in May, followed by a likely pause in June. The prospect of a less hawkish Fed benefits gold, as higher interest rates increase the opportunity cost of holding non-yielding assets.
Other precious metals also rose on Friday and were set for a strong week. Platinum futures rose 0.6% to $1,069.15 an ounce, while silver futures rose 0.9% to $26.148 an ounce. Among industrial metals, copper prices rose sharply, buoyed by a weaker dollar. Sentiment towards the red metal was also aided by optimism over a demand recovery in China, a major importer of copper.
Copper futures rose 1% to $4.1680 a pound and were set to add nearly 4% for the week. Although China’s copper imports fell by 19% in March, an overall improvement in the country’s imports sparked bets that commodity demand would pick up in the coming months.
In conclusion, gold prices have been on an upward trend due to several factors, including easing U.S. inflation, concerns about a potential recession in 2023, and safe-haven demand. Other precious metals and industrial metals also saw gains, supported by a weaker dollar and optimism about the global economic recovery.
