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Gold ends at a fresh 9-month high as inflation wanes

MarketWatch logo MarketWatch 6 days ago Myra P. Saefong
© daniel roland/Agence France-Presse/Getty Images
METALS STOCKS

Gold prices ended Tuesday at a fresh nine-month high as expectations for smaller U.S. interest-rate hikes helped bolster the yellow metal while weighing on the dollar.

Price action
  • Gold for February delivery  rose $6.80, or nearly 0.4%, to settle at $1,935.40 per ounce on Comex, marking the highest finish for a most-active contract since April 21, FactSet data show.
  • Silver for March delivery gained 20 cents, or 0.8%, to $23.749 per ounce.
  • March palladium advanced by $34.10, or 2%, to $1,735.50 per ounce, while April platinum gained $10.50, or 1%, to $1,066.80 per ounce.
  • Copper for March fell by a penny, or 0.2%, to $4.2485 per pound.
Market drivers

Precious metals analysts credited signs of waning U.S. inflation with helping to boost the price of gold by making it easier for the Federal Reserve to pause its interest-rate hikes, or even switch back to cutting rates.

“With the U.S. dollar on the backfoot, inflation rates around the world coming down and the Fed more likely to tone down its hawkish rhetoric rather than ratchet it up, gold has been enjoying a strong revival over the past three months,” said Raffi Boyadjian, lead investment analyst at XM. “As long as inflation continues to come down and not prove sticky, gold’s uptrend should continue.”

The U.S. dollar weakened against major currencies Tuesday, causing the ICE U.S. Dollar Index to fall by 0.2% to 101.94. The yield on the 10-year note fell by 5.5 basis points to 3.468%. Treasury yields move inversely to prices.

“A weaker dollar and soft U.S. economic data could further sweeten appetite for gold over the next few days,” said Lukman Otunuga, manager, market analysis at FXTM.

U.S. business conditions contracted again in January as demand for goods and services fell for the fourth month in a row, S&P surveys released on Tuesday showed.

The annual rate of U.S. inflation fell for the sixth month in December to 6.5% from 7.1%, according to the latest consumer-price index, released earlier this month.

The latest producer-price index, released last week, showed U.S. wholesale prices sank 0.5% in December mostly due to cheaper food and gasoline, extending a string of low readings and adding further proof that inflation is fading.

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