Gold Inches Higher After Inflation Data, Tillerson Departure

Date : 03/13/2018 @ 7:23PM
Source : Dow Jones News

Gold Inches Higher After Inflation Data, Tillerson Departure

By Amrith Ramkumar and Christopher Alessi 

Gold prices rose Tuesday, boosted by a weaker dollar and lower Treasury yields after data showed U.S. consumer prices rose moderately in February and President Donald Trump said he would nominate Mike Pompeo, director of the Central Intelligence Agency, to replace Secretary of State Rex Tillerson.

Front-month gold for March delivery climbed 0.5% to $1,325.90 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have stayed between roughly $1,305 and $1,360 this year, moving based on swings in the dollar, interest-rate worries and investors' risk appetite.

Data Tuesday showed the consumer-price index, which measures what Americans pay for everything from shampoo to hotel stays, rose 0.2% in February after rising a seasonally adjusted 0.5% in January. In the year to February, overall prices rose 2.2%, the largest annual increase since November but slightly below expectations. Excluding the volatile food and energy categories, core prices were up 1.8% on the year.

Some investors had feared recently that the Federal Reserve would raise interest rates four times this year as inflation picked up, after previously projecting three increases.

The central bank is widely expected to raise rates at its meeting next week, but any sign that there is hesitation to raise rates four times could support gold and other assets that struggle to compete with yield-bearing assets like Treasurys as borrowing costs rise, said Bob Haberkorn, senior market strategist at RJO Futures.

"Anything less than that would be very bullish for gold if we get any indication that's the case," Mr. Haberkorn said.

Still, Mr. Haberkorn said he doesn't expect Tuesday's report to change the outlook for the Fed or gold market. Gold has tended to fall before the Fed has raised rates over the past few years.

The news that another White House official is departing was boosting gold by adding to political uncertainty, Mr. Haberkorn said. Many investors buy the precious metal to protect themselves against a downturn in markets.

A weaker dollar was supporting gold by making it cheaper for overseas buyers. The WSJ Dollar index, which tracks the U.S. currency against a basket of 16 others, was down 0.2%.

Although gold is only up 1.5% this year coming off its best year since 2010, some investors think a weaker dollar, higher market volatility and broader economic concerns if protectionist trade policies disrupt growth could lift prices more moving forward.

"When you put these together, can you go through 2018 without some of this coming the gold trade's way? I don't think so," said Trey Reik, senior portfolio manager at Sprott Asset Management.

Among base metals, front-month copper for March delivery edged up 0.5% to $3.1190 a pound. Prices have fallen 4.9% this year on worries that demand from China, the world's largest consumer, might slow, but some analysts expect steady economic data and supply disruptions to boost the industrial metal as the year goes on.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

 

(END) Dow Jones Newswires

March 13, 2018 15:08 ET (19:08 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.


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