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Gold ends lower as investors await inflation report

Gold ends lower as investors await inflation report

Mon Mar 12 2018


Gold prices finished modestly lower on Monday, giving back the gains seen in the previous session as investors await U.S. consumer-price index data due Tuesday for the latest clue on the pace of Federal Reserve interest-rate hikes.


Global risk-on sentiment, including some gains in the U.S. stock market in early Monday trading, seen after Friday’s U.S. jobs report contributed to losses for the yellow metal. As gold prices settled, however, benchmark U.S. stock indexes saw more mixed trading and the dollar weakened, helping gold come off the day’s worst levels.


April gold GCJ8, -0.18% fell $3.20, or 0.2%, to settle at $1,320.80 an ounce after trading as low as $1,315.30. Gold prices ended nearly 0.2% higher Friday, turning the metal’s weekly return just positive after a report revealed a strong rise in U.S. hiring but disappointing growth in wages.


The latest snapshot of the U.S. labor market showed strong job growth and a higher participation rate, with the nation adding 313,000 new jobs in February. But the 12-month increase in pay slipped to 2.6% from a revised 2.8% in January.


Markets had braced for a stronger wages reading after an inflation scare within this report a month earlier helped to sink stocks. Rising inflation could add pressure on the Fed to speed up its rate rises, which could strangle the stock market. Gold, in turn, although negatively affected by higher interest rates, could attract hedging demand against too-hot inflation.


“The numbers we saw on Friday provided the perfect balance of strong job creation and softer wage growth, which does not necessarily trigger faster rate hikes,” said Craig Erlam, senior market analyst at OANDA. “The much higher participation rate was a clear reminder that, while unemployment is at a 17-year low, there is still some slack in the economy which may take longer to sort out and explain why wage growth and inflation is so muted.”


On Monday, the ICE U.S. Dollar Index DXY, +0.17%  was down 0.2% at 89.92, but posted a gain for last week. Gold and the dollar typically move inversely as currency levels influence demand among gold buyers using another currency. Higher interest rates tend to be dollar-positive.


“I think the [U.S. dollar] could continue to recover this week. That’s because in a relatively quiet week, the main indicator—in fact the main event—is going to be the release of the U.S. CPI for February on Tuesday,” said Marshall Gittler, chief strategist at ACLS Global. “And surprisingly, the market pays more attention to the headline figure than to the core figure.”


“So if Tuesday’s U.S. CPI does show headline inflation accelerating further above the Fed’s 2% target about a week before the next FOMC meeting, that should solidify expectations of higher interest rates and cause the dollar to appreciate further,” he said.


As for other metals, May silver SIK8, -0.25%  fell 7.2 cents, or 0.4%, to $16.536 an ounce. On Friday, it logged a 0.9% weekly gain.


Among exchange-traded funds, the silver-focused exchange-traded iShares Silver Trust SLV, -0.13%  fell 0.4%, while the SPDR Gold Shares GLD, +0.00% fell 0.2%. The VanEck Vectors Gold Miners ETF GDX, +0.88% however, added 0.2%.


May copper HGK8, +0.05%  fell 0.4% at $3.124 a pound. April platinum PLJ8, +0.06% fell 0.1% to $962.90 an ounce and June palladium PAM8, +0.62%  shed 2% to $967.65 an ounce.