Gold futures headed higher on Wednesday, after posting losses in each of the last two trading sessions, with inflation concerns supporting the precious metal as a measure of the U.S. dollar eased slightly from the highest level since around July of 2020.
Bullion climbed after the precious commodity had been slipping somewhat Tuesday as strong U.S. economic data delivered a boost to the U.S. dollar and quelled demand somewhat for safe-havens.
It’s more than the economic data on inflation “filtering through the economy to the consumer,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. ” Inflation and ability or inability to pass along to consumer has been key parts of dialogue in earnings calls with Walmart
this week. ”
Inflation concerns and the realization the inflation is not under control are “real and not just in the financial markets when it becomes an issue addressed by major retailers, as the market is looking for more clarity,” said Wright.
” Gold has responded by moving higher and establishing higher floors of support over past month or so,” he said.
rose $13.90, or 0.8%, to trade at $1,868 an ounce, following price declines on Monday and Tuesday.
Data on Tuesday showed that U.S. retail sales jumped by 1.7% in October, marking the biggest gain since March.
However, inflation was also featured in the retail sales figures, buttressing values for gold, which is seen as a hedge against inflation.
“The latest surge in inflation expectations is supporting the gold rally as real interest rates continue to fall,” analysts at Sevens Report Research wrote in Wednesday’s newsletter.
“However, if inflation does peak in the months ahead as most central bankers continue to anticipate, then real rates are likely to bottom and the prospects of new record highs for gold will fade,” they said. “For those riding the latest leg higher in gold, the trend is still bullish and dips to the low $1,800s are likely to be good buying opportunities for a low timeframe long.”
Investors will look to a parade of speakers from the Federal Reserve on Wednesday for further guidance about the health of the U.S. economy and the pace of the current reduction of monthly purchases of Treasurys and mortgage-backed securities and the timing and pace of interest rate increases, which could also factor into prices for global assets like gold.
“Today, the focus is going to be on the Fed speeches as a number of members will be speaking today,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a Wednesday note.
On Wednesday New York Fed Bank President John Williams said, according to a report from Reuters, that the markets need to be strengthened to prepare for the next big shock.
Other speakers from the U.S. central bank on Wednesday include San Francisco Fed President Mary Daly, who will participate in a fireside chat with Rostin Behnam, acting chair of the Commodity Futures Trading Commission Treasury at 12:40 p.m. Other speakers later in the session, include Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans are set to speak after Comex traded gold settles at 2 p.m.
“What we want to hear from them is a coherent message in terms of the monetary policy. So far, the Fed Chairman has said that there is no rush to increase the interest rate and market players aren’t expecting any interest rate until Q3 of next year,” wrote Aslam.
Meanwhile, silver for December delivery
on Comex rose 27.6 cents, or 1.1%, at $25.22 an ounce, aiming to more than make up for a 0.6% decline on Tuesday.
Wednesday’s trading come as the ICE U.S. Dollar Index
a gauge of the currency against a half-dozen others, was trading down by about 0.1%, coming off trading at its loftiest level since around July 2020. A weaker dollar can make assets priced in the currency more appealing to overseas buyers using alternate monetary units.
In other Comex trading, December copper
was down 1.4% at $4.289 a pound and January platinum
shed 0.3% to $1,071.50 an ounce, while December palladium
traded at $2,169 an ounce, up nearly 0.1%.