No Let-Up in Gold's March
Gold continues to give for investors and miners in Australia.
Comex gold prices hit their highest level of the year on Thursday, driven by investor bets that inflation will remain sticky despite recent signs of easing.
The most actively traded gold futures contract rose to $US2,055.30 an ounce, up more than 1.4% on the day and over 12% year to date.
That also put it within striking distance of its all-time futures high of $US2,078.80 reached on August 6, 2020.
The drive higher by gold again dragged silver up with it and Comex May silver settled up 2% at $US25.97 an ounce and up more than 7% year to date.
Gold's strength matched that in equities with the @&P 500 up 1.33% to 4,146.22, its highest close since February. The Dow was up 1.14% at $34,029.69 and Nasdaq was up 1.99% at 12,266.27
Gold’s surge comes after Federal Reserve minutes on Wednesday indicated that several members of the Open Markets Committee thought rate increases should be paused because of fears the recent banking sector stress would tip the economy into recession this year.
The US dollar weakened after data showed a moderation in the rise in producer prices last month and an uptick in jobless claims, suggesting the Fed’s aggressive pace of rate rises was having a slow but rising impact on the economy and demand.
March US producer prices fell 0.5% from February while the market was expecting no change. The report helped to put more downside pressure on the US dollar index, which hit 2023 lows late in Thursday trading.
Despite the clear earning in US consumer prices (which barely rose in March), high rents and other costs are keeping underlying (core) inflation pressures on the rise.
In their weekly note, Moody’s economists Friday said they expected a 0.25% rate rise from the Fed at its meeting next month.
"Our April baseline forecast calls for an additional 0.25- percentage point increase to the fed funds rate when the Federal Open Market Committee (FPMC) reconvenes in early May.”
"At the June meeting, we expect policymakers to pause after what will have been 10 consecutive meetings with an announced rate hike. That sprint to sufficiently restrictive policy will bring the terminal rate, the highest rate reached during a tightening cycle, to 5%-5.25%. This is in line with the FOMC’s latest projection."
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.