U.S. Core PCE rises 0.3% in February, in line with expectations

Gold investors, with nothing else to do, can at least breathe a sigh of relief as inflation pressures rise in line with expectations.

Friday, The U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.3% last month. The data rose in line with economist expectations.

However, as a sign that inflation pressures aren’t going away, the report also noted an upward revision for January, with core inflation rising by 0.5%.

For the last 12 months, consumer price pressure continued to ease, rising 2.8% in February. Although inflation is still well above the Federal Reserve’s target of 2%, it continues to trend lower.

The report said headline inflation rose 0.3% last month, a tick lower than expected. Economists were looking for a 0.4% increase. For the year, headline inflation rose 2.5%, in line with consensus projections.

Markets are closed for Good Friday, so there has been no reaction to the latest inflation data.

With inflation pressures rising in line with expectations, investors could start to focus on a growing imbalance in the economy as consumers spent more than they made last month.

The report said wages increased less than expected last month, rising 0.3%. According to consensus forecasts, economists were looking for a 0.4% increase. Meanwhile, personal consumption jumped 0.8% in February. Economists forecasted a 0.5% increase.

According to some economists, the in-line inflation data could support the Federal Reserve's plan to begin its easing cycle in June, even as inflation remains elevated.

Last week, the Federal Reserve signaled it wanted to cut interest rates three times this year, even as inflation was holding around 2.4%.

An impending pivot in the U.S. central bank’s aggressive monetary policies has emboldened gold investors in recent days. Thursday, during the final trading day in March and the first quarter, June gold futures rose to a new all-time high of $2,256.90 an ounce and settled the session at $2,234.40 an ounce.

In an interview with Kitco News, Darin Newsom, Senior Market Analyst at Barchart, said that inflation could be one factor in why the gold market has been able to defy fundamental and technical logic.

Gold’s rally on Thursday came despite resilient strength in the U.S. dollar, which closed the session near a six-week high above 104 points.

“Gold could be telling us that inflation will stay around for a while. And that there's a real there's a real threat geopolitically,” he said.

Some analysts have also noted that gold doesn’t actually need a rate cut to maintain its upward trajectory. While higher inflation could keep the Federal Reserve from cutting rates this year, it is unlikely they will raise interest rates. This environment would still push real interest rates lower, which should weigh on the U.S. dollar, supporting gold prices.

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

Tim Moseley

Gold appears unstoppable as it hits record highs above $2,250, capping off a solid month and quarter

The gold market continues to be an unstoppable juggernaut as it closes out the month and quarter near a record high, solidly above $2,200 an ounce.

Analysts note that gold’s performance on Thursday, which wraps up a shortened trading week ahead of the Easter long weekend, is even more impressive when compared to the U.S. dollar Index, which is trading near a six-week high above 104 points.

Gold prices last traded at $2,241 an ounce, up 2.7% from last week. For the month, gold is up 9%, and for the quarter, the precious metal is up 8%.

Gold’s further push into blue sky territory also comes ahead of important inflation data. Although markets are closed for Easter, it is not a recognized government holiday, so the U.S. Bureau of Economic Analysis will be releasing its Personal Consumption Expenditures (PCE) Index. According to consensus estimates, economists expect inflation to have risen 0.3% in February.

Some analysts have said that gold is attracting new momentum because inflation is less of a threat than it was. Last week the Federal Reserve signaled that it still looks for three rate cuts this year even as they see inflation holding above its 2% target.

Darin Newsom, Senior Market Analyst at Barchart said that the gold rally is a signal that investors are worried that the Federal Reserve won’t be able to get inflation under control as it starts to cut interest rates.

He added that he also sees gold well supported as a geopolitical risk hedge.

“Geopolitical fears are still out there and will only continue to grow as we approach the November U.S. election,” he said. “If the Fed starts cutting rates, bond yields will fall, which makes gold a more attractive safe-haven.”

At the same time, some analysts note that the U.S. dollar is losing its grip on the gold market as U.S. government debt continues to spiral higher.

“Gold is not expensive. The truth is that the U.S. dollar is cheap as the government floods the global economy with it,” said Julia Khandoshko, CEO at the European broker Mind Money, in an interview with Kitco News.

Although the Federal Reserve has been tightening its balance sheet as part of its aggressive monetary policy, some analysts have noted that the nation’s money supply continues to grow.

David Kranzler, precious metals analyst and creator of the The Mining Stock Journal said in a comment on social media that the U.S. The Monetary Base, as measured by Money Zero Maturity (MZM), is up nearly 10% since March 2023.

“Gold smells a massive money-printing program coming at some point. In fact, low-grade money printing has already occurred,” he said.

MZM represents money readily available within an economy for spending and consumption. and includes M2 money supply, less the time deposits, plus all money market funds.

Regardless of what is driving gold at its record highs, Adam Button, Chief Currency Strategist at Forexlive.com said that he expects this is only the start of the rally.

Despite gold’s historic rally, Button said that the precious metal sector continues to be ignored in the broader marketplace. He added that the mining sector, while off its lows is still significantly undervalued compared to gold prices.

“This quiet rally is extremely encouraging for gold investors,” he said. “This is not an exhausted bull market. The time to sell is when everyone is talking about gold and the miners are taking off.”

Although Button is bullish on gold, he added that investors should wait for a pullback before jumping in. He pointed out that there appears to be some initial support at $2,150 that could attract some buyers.

Ole Hansen, Head of Commodity Strategy at Saxo Bank said that he expects the gold market to have further upside potential. He added that it's more than just momentum that is pushing gold prices higher.

“Gold’s continued ability to withstand headwinds from dollar and yield movements is nothing but impressive and it highlights a market that continues to attract demand making it a relatively easy task for hedge funds to defend their huge long positions,” he said. “My main concern during the past couple of weeks has been the risk of weakness forcing a cascade of long liquidation, but with prices now above $2,200 that risk continues to fade.”

Although gold is ending a shortened trading week on a strong note, next week does present new risks. The economic calendar next week will focus on the U.S. labor market with March’s nonfarm payrolls report on Friday as the highlight.

The week also features a solid lineup of central bank speakers including Federal Reserve Chair Jerome Powell, who will be speaking at Stanford's Business, Government, and Society Forum.

Some analysts have said that stronger employment numbers, coupled with stubborn inflation may force the Federal Reserve to push back the start of its approaching easing cycle.

“Macro traders certainly still have scope to add to their gold length — but only if rates market expectations notably firm. This places the onus on upcoming data to corroborate the Fed's outlook for three cuts this year, but continued strength in the data with little change in tone from the FOMC also raises the risk of a buyer's strike in Treasuries, leading to higher rates that could mechanically weigh on the yellow metal through the re-accumulation of macro trader short acquisitions,” said commodity analysts at TD Securities.

Economic data for the week

Monday: ISM Manufacturing PMI

Tuesday: JOLTS job openings

Wednesday: ADP nonfarm employment change, ISM Service Sector PMI, Powell to speak

Thursday: Weekly jobless claims

Friday: Nonfarm payrolls

Kitco Media

Neils Christensen

Time to Buy Gold and Silver

Tim Moseley

Gold gains on technical buying, friendly outside markets

Gold prices are posting decent gains in midday U.S. trading Monday, supported by chart-based buying amid bullish technicals, and by friendly daily “outside market” forces that see the U.S. dollar index lower and crude oil prices higher. Silver prices are trading slightly up. April gold was last up $16.80 at $2,176.70. May silver was last up $0.042 at $24.885.

Broker SP Angel this morning said in an email dispatch that China and other central banks continue to buy gold. “Recent interest rate moves by major central banks of Japan, Taiwan and Turkey along with the expectations for U.S. rate cuts are making gold increasingly attractive. Investors also remain concerned at the level of high government debt supported by the U.S. and China.”

The key outside markets today see the U.S. dollar index lower. Nymex crude oil prices are higher and trading around $82.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently fetching around 4.25%.

Technically, April gold futures bulls have the solid overall near-term technical advantage. A five-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the contract and record high of $2,225.30. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $2,149.20. First resistance is seen at the overnight high of $2,182.50 and then at Friday’s high of $2,188.00. First support is seen at today’s low of $2,164.40 and then at Friday’s low of $2.158.40. Wyckoff's Market Rating: 8.0.

May silver futures bulls have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at the March high of $25.975. The next downside price objective for the bears is closing prices below solid support at $23.50. First resistance is seen at Friday’s high of $25.11 and then at $25.50. Next support is seen at last week’s low of $24.58 and then at $24.22. Wyckoff's Market Rating: 6.5.

May N.Y. copper closed up 80 points at 401.55 cents today. Prices closed near mid-range. The copper bulls have the firm overall near-term technical advantage but appear tired now. Prices are in a six-week-old uptrend on the daily bar chart. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at the March high of 416.40 cents. The next downside price objective for the bears is closing prices below solid technical support at 385.00 cents. First resistance is seen at today’s high of 404.70 cents and then at Friday’s high of 406.65 cents. First support is seen at today’s low of 399.05 cents and then at 396.75 cents. Wyckoff's Market Rating: 7.0.

Kitco Media

Jim Wyckoff

Time to Buy Gold and Silver

Tim Moseley