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Gold retakes $1,800 as investors weigh U.S. inflation report

MarketWatch logo MarketWatch 9/14/2021 Myra P. Saefong
© noah seelam/Agence France-Presse/Getty Images
METALS STOCKS

CORRECTION: An earlier version of this report made an incorrect reference to palladium supplies. The WPIC forecasts a 2021 surplus in supplies of platinum.


Video: Inflation data comes in lower than expected for August (CNBC)

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Gold futures turned higher on Tuesday even though data showed U.S. inflation rising in August at the slowest pace in seven months.

The consumer-price index climbed 0.3% in August,  compared to a rise of 0.5% in July, the government said Tuesday. Economists polled by the Wall Street Journal estimated the cost of living, as measured by CPI, rose 0.4% in August.

The lower-than-expected consumer price index number has resulted in a weaker U.S. dollar, supporting dollar-denominated gold prices, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. The data also eased expectations for an early taper by the Federal Reserve, he said.

Against that backdrop, December gold erased a double-digit point decline to trade $13.20, or 0.7% higher, to reach $1,807.60 an ounce, following a 0.1% rise on Monday. December gold hit an intraday high on Tuesday at $1,802.10 an ounce.

In addition to CPI data, the Fed next week will likely use inputs, including the CPI report, to determine its plans for scaling back COVID-era bond purchases which have been in force to help provide liquidity to markets that were gummed up during the worst of the pandemic in the spring of 2020.

“The yellow metal will remain sensitive to US economic releases this week, especially today’s inflation reading, with any delay to tapering being a positive catalyst in the coming weeks,” wrote Craig Erlam, senior market analyst at Oanda Corp., in a research note.

Many members of the interest rate-setting Federal Open Market Committee, including Chairman Jerome Powell, have recently said that the central bank should announce tapering of its monthly purchases of $120 billion in Treasurys and mortgage-backed securities by the end of the year if the economy continues to recover from COVID.

December silver   was trading down by 0.2% at $23.75 an ounce, reversing a sharp loss from earlier in the session, following a 0.4% decline on Monday.

Palladium plunge

Meanwhile, palladium prices have been under heavy selling pressure on the session and over the past week. The white metal is mainly used in catalytic converters in gasoline-powered vehicles to help control emissions.

However, prices of palladium have been on the rise amid expectations for growth in photovoltaic sector and electric vehicle market where the metal, along with platinum, also is used.

The World Platinum Investment Council said that it expects higher costs of palladium, used in vehicle pollution-control devices, to spur a gradual switch by auto makers to using more platinum in gasoline-powered cars and trucks.

In Tuesday dealings, December palladium PA00 PAZ21 was trading $121.30, or 5.8%, lower, at $1,958.50 an ounce. Palladium is down around 34% from its early May peak.

The WPIC is also predicting a “modest” 2021 surplus in platinum. “If confirmed, it would be the first surplus since 2018,” according to Peter Grant in Zaner’s latest Grant on Gold newsletter.

The most-active October platinum contract lost $17, or 1.8%, to $940.50 an ounce.

Some analysts speculate that China’s attempt to curb price surges of a number of commodities and some slowdown in the electric vehicle market, spurred by computer chip shortages, is weighing on the asset’s price.

On Tuesday, palladium prices were headed for a six-session losing streak, which would match the longest streak of declines since a period ended March 13 of 2020, FactSet data show. The declines have brought palladium down to around its lowest price since July of 2020.

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