Gold futures headed higher on Friday as the U.S. dollar declined on the heels of data showing a monthly rise in a key measure of U.S. inflation, but no changes to consumer spending.
Prices for the precious metal were poised to score a weekly gain, following three-consecutive weeks of declines.
“It has been a choppy week for the precious metal thanks to conflicting signals from Federal Reserve officials over the inflation outlook,” Lukman Otunuga, senior research analyst at FXTM, told MarketWatch. “Nevertheless, the metal is heading for its first weekly increase since May as investors digest the latest PCE inflation data for May.”
The personal-consumption expenditures index, or PCE, the Federal Reserve’s favorite inflation indicator, increased 0.4% in May, while the core reading, excluding volatile food and energy prices, rose 0.5%.
On an annual basis, the PCE deflator rose 3.9% for the year, the biggest increase since August 2008. Excluding food and energy prices, the core PCE rose 3.4% in the year to May, the fastest increase since 1992, the Commerce Department reported Friday. However, consumer spending was basically flat in May, missing forecasts, while personal income declined by a less than expected 2%.
“The PCE data miss may ease concerns over the Federal Reserve acting sooner than expected,” said Otunuga.
August gold GCQ21, 0.09% GC00, 0.09% rose $5.30, or 0.3%, at $1,782 an ounce, following a 0.4% decline on Thursday. For the week, bullion based on the most-active contract is looking at a 0.7% gain, which would follow three-consecutive weekly declines.
July silver SIN21, 0.21% SI00, 0.21% tacked on 15 cents, or 0.6%, to $26.20 an ounce, heading 0.9% higher for the week.
Gold investors have been their attention to new rules that come into effect on Monday for European banks that may shake up the market for the precious metal.
The accord for European banking capital requirements are a “positive for gold, but only physical gold,” said Jeff Wright, chief investment officer at Wolfpack Capital. Physical gold will become a risk-free tier 1 asset, and “implies gold has the highest level of liquidity, on par with cash.”
The new requirements do not mean that European banks will rush to buy more gold, as some of these purchases have already taken place since the rule change was announced a couple of years ago, he said. Longer term, however, gold will be “more prolific at the large bank and central banking level” and should “increase overall liquidity for the gold market, which is a net positive for investors and traders.”
Meanwhile, in Thursday dealings, a gauge of the U.S. dollar, the ICE U.S. Dollar Index DXY, -0.05%, was down 0.6% for the week, contributing support for dollar-denominated precious-metals prices. The 10-year Treasury yield note TMUBMUSD10Y, 1.540%, meanwhile, hung around 1.5%, up from 1.486% on Thursday.
Taking a look at the broader picture for gold and silver, Kevin Rich, global gold market advisor for The Perth Mint, said that “as the economy reopens, we are witnessing an enormous dislocation in the labor markets.” The Fed is signaling it “will be stepping back in their programs which have supported the capital markets so well throughout the pandemic.”
“How quickly we can get back to more normal levels of employment and GDP is uncertain, so gold and silver will most likely trade sideways until we see real improvement in unemployment levels and GDP results,” he told MarketWatch.
Rounding out action on Comex, prices for July copper HGN21, -0.36% edged down by 0.4% to $4.29 a pound, still trading more than 3% higher for the week.
July platinum PLN21, 0.93% added 0.6% to $1,100.20 an ounce, up around 5.7% for the week, while September palladium PAU21, -0.30% shed 0.3% to $2,637 an ounce, though traded up by 6.8% for the week. Market Watch.com