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Gold glitters over softer US PPI figures, geopolitical risks add to yellow metal’s shine, silver down 0.3%

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Gold prices traded higher on Thursday, April 11, after softer-than-expected US producer prices data boosted hopes for US interest rate cuts this year, while persistent geopolitical concerns added to the yellow metal’s shine.

Spot gold rose 0.3 per cent to $2,340.69 per ounce. Bullion prices had hit an all-time high for an eighth straight session on Tuesday, April 9. US gold futures were up 0.4 per cent at $2,358.40. Spot silver edged 0.3 per cent lower at $27.89 per ounce. Platinum rose 1.4 per cent to $972.85 and palladium lost 1.8 per cent to $1,032.50, according to news agency Reuters.

US economic indicators support gold prices

Earlier today, the US Labor Department report showed that producer price Index (PPI) in the world’s largest economy rose 0.2 per cent month-on-month (MOM) in March and allayed worries that interest rates may stay high. The data compares to a 0.3 per cent increase expected by economists polled by Reuters.

The US PPI data comes one day after Wednesday’s data revealed that the US consumer price index (CPI) rose 0.4 per cent MOM and 3.5 per cent year-on-year (YoY)–higher than Wall Street estimates, which had pushed away hopes of a June interest rate cut from the US Federal Reserve. The core prices were up 3.8 per cent, unchanged from the YoY rise in February. The US central bank closely tracks core prices as it provides a reliable indicator of inflation in the country.

The Fed could start interest-rate cuts as early as its late-July meeting, traders bet, after the inflation data. Gold is traditionally known as an inflation hedge but higher interest rates reduce the allure of holding non-yielding gold.

Where are gold prices headed?

Since mid-March, both gold and silver prices have been steadily climbing, reaching all-time highs in both international and domestic markets. The surge in demand has been attributed to expectations of rate cuts by central banks worldwide and escalating geopolitical tensions –which have significantly driven bullion prices and continue to be pillars of support for the gold market.

UBS analyst Giovanni Staunovo said that for the next leg higher (in prices), we still need to see a return of gold exchange-traded-fund (ETF) demand and that requires the Fed indicating a rate cut. Currently, both gold and silver are navigating through overbought territories, facing strong resistance levels.

‘’International gold prices are encountering robust resistance between $2450 and $2485, while domestically, the bullish momentum is expected to taper off around levels of 72000 to 72200. Similarly, silver prices are facing resistance internationally at levels between $28.50 and $28.95, and domestically at around 83500. Given these conditions, profit-taking in both precious metals is anticipated to be on the horizon,” said Riya Singh – Research Analyst, Commodities and Currency Desk, Emkay Global.

​Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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