Gold futures settled higher on Monday for a third straight session, as investors shook off a continued rise in Treasury yields to focus on inflation.
“The world is focused on inflation and supply chain normalization,” Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. Gold and precious metals are the “only hedge against inflation and more so, food inflation.”
A big, short-term rise in food prices will cause an earlier economic recession “than most of us expect,” he said. That would lead to a stock market drop world-wide and gold will rise if the climb in food prices become “unmanageable,” he said.
Gold for June delivery
rose $2.60, or 0.1%, to settle at $1,948.20 an ounce, after rising 1.1% last week. Prices based on the most-active contract ended at their highest since March 31, FactSet data show. May silver
also climbed 16 cents, or 0.7%, at $24.987 an ounce.
Gold is “likely to remain volatile while investors continue to adjust their portfolios according to the [Federal Reserve’s] hawkish monetary policy, while keeping a close eye on the economic fallout of the Ukraine crisis,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update.
In terms of price action, “it is very clear that traders would like to have more clarity on geopolitical uncertainty between the U.S. and Russia and the rising inflation situation in the U.S.,” he said. “Supply-side disruptions, worsened by the Russia–Ukraine war, are likely to keep inflation higher for longer.”
Investors will look to the latest U.S. economic data for hints on the outlook for gold, with U.S. inflation running at its hottest in nearly 40 years.
On Monday, data from the New York Federal Reserve showed another rise in short-term inflation expectations, but medium-term expectations fell. The median one-year-ahead inflation expectations rose to a new series high of 6.6%, from 6.0% in February. The NY Fed also reported that median three-year ahead inflation expectations fell to 3.7% from 3.8%.
The March consumer-price index is due Tuesday morning, while the producer-price index for last month is set for release on Wednesday. Thursday brings the University of Michigan preliminary April consumer sentiment readings, including its gauge of five-year inflation expectations. See: U.S. economic calendar.
“A lower CPI and lower PPI numbers will cause a sell off in bullion price,” said Karnani.
Still, the technical scenario for gold is improving, said Carlo Alberto De Casa, external market analyst at Kinesis Money, in a note.
“The new week started with the gold price jumping above the key resistance of $1,950 an ounce and trying to leave the lateral trading range between $1,890 and $1,950 of the last few sessions,” he wrote. A “clear surpass of the $1,950 mark could open space for further recoveries, confirming the bullish trend.”
In other metals trading on Comex, May copper
shed 1.9% to $4.634 a pound.
tacked on 0.2% to $977.80 an ounce and June palladium
settled at $2,416.80 an ounce, down 0.1%.
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