Gold prices eye first loss in 5 sessions as U.S. producer price index reading lower than expected

Gold futures headed lower on Thursday, with prices on track to post their first loss in five sessions, after a rise in the U.S. producer price index reading for December came in below market expectations.

“It could be argued that the bullish case for gold is its reputation as an inflation hedge, especially given central banks’ recent record for recognizing how severe the situation is,” said Craig Erlam, senior market analyst at OANDA. “But with inflation likely nearing its peak, that may not last.”

“That said, fear around Fed tightening may also be peaking which could support gold in the short-term and a break through $1,833 could signal further upside to come,” said Erlam, in a market update.

U.S. wholesale prices rose 0.2% in December, marking the smallest increase in 13 months, perhaps a sign that high inflation is finally starting to ease after the biggest runup in nearly 40 years. The increase in the producer price index fell below the 0.4% forecast of economists polled by The Wall Street Journal. The advance in wholesale prices over the past year slipped to 9.7% from 9.8% in the prior month. It was the first decline in the yearly rate since early in the pandemic.

Data released a day earlier revealed U.S. consumer prices rose 0.5% in December to push the increase in the cost of living last year to a nearly 40-year high of 7%, underscoring the belief that high inflation is likely to persist in 2022.

Gold is traditionally viewed as a hedge against inflation, but the surge in prices for goods and services, caused by supply-chain bottlenecks and a revival in consumer demand in the wake of the COVID pandemic, is also likely to compel the Federal Reserve to lift interest rates at a faster than expected pace this year and may weigh on precious metal prices.

Against that backdrop, February gold


fell $9.30, or 0.5%, to $1,818 an ounce, after climbing 0.5% in the previous session. Prices for the most-active contract ended Wednesday at their highest since Dec. 31 and notched a fourth straight session gain, marking the longest string of gains since a seven-session stretch ended Nov. 12, FactSet data show.

That said, gold has been relatively resilient in the face of volatile financial markets that are looking at the prospect of higher borrowing costs and inflation.

Meanwhile, March silver


was down 2.2 cents, or 0.1%, to reach $23.185 an ounce, following a 1.7% advance on Wednesday.

Also on Comex, March copper

shed 0.7% to $4.545 a pound after posting a gain of more than 3% on Wednesday. April platinum

lost 1% to $970.50 an ounce and March palladium

traded at $1,903.50 an ounce, down 0.6%.

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