Gold is little changed this morning after the most-active futures contract settled below $1,500 an ounce for the first time in more than a month on Tuesday. This morning, the August Producer Price Index (PPI) rose a stronger-than-expected 0.3%. Even though this jump in producer prices could lead to inflation pressure, gold saw little to no reaction.
The December gold contract fell 0.8% Tuesday to $1,499.20 an ounce on Comex as bond yields rose for a fifth day and the dollar strengthened. The December contract ticked down a touch this morning, currently at $1,498.00. Futures fell 1.1% in the first two days of the week, adding to losses last week on weak economic data, uncertainty over the U.S.-China trade war, fears of an economic recession and heightened speculation of monetary easing from central banks around the world.
The CME FedWatch Tool put the probability of a Fed interest-rate cut on Sept. 18 at 86.5% this morning, with the same percentage predicting a 25-basis-point reduction. That’s down from 96.2% a week earlier. The odds of no cut are 13.5%.
The European Central bank is widely expected to cut rates on Thursday.
Gold prices may rally to a record above $2,000 an ounce in the next two years, Citigroup Inc. analysts forecast in a note this week, citing drivers including the risks of a global recession and the likelihood that the Fed will cut U.S. interest rates to zero, the Financial Times reported.
China has added almost 100 tons of gold to its reserves since it resumed buying in December, Bloomberg reported this week. The People’s Bank of China raised bullion holdings to 62.45 million ounces in August from 62.26 million a month earlier, according to data on its website at the weekend. In tonnage terms, August’s inflow was 5.91 tons, following the addition of about 94 tons in the previous eight months.
Meanwhile, Russia has quadrupled gold reserves in the past decade as it diversified away from U.S. assets, Bloomberg said. In the past year, the value of the nation’s gold jumped 42% to $109.5 billion and the metal now makes up the biggest share of Russia’s total reserves since 2000, the agency reported.
China and Russia “can read the writing on the wall,” Peter Schiff, CEO of Euro Pacific Capital, told Fox Business. The two countries “are preparing for the world where the dollar is no longer the reserve currency.”
In economic events for the rest of the week, investors will be looking at jobless claims and the consumer price index on Thursday and University of Michigan consumer sentiment data on Friday.
Silver gained while gold fell Tuesday. The most-active December contract increased 0.1% to $18.186 an ounce on Comex and is up 0.4% in the first two days of this week. This morning finds the December contract slightly down at $18.150.
Spot platinum tumbled and spot palladium advanced.
South Africa’s main platinum mining union said it had formally declared that wage talks with Anglo American Platinum (Amplats) and Sibanye-Stillwater were deadlocked, raising the possibility of strike action if the issue cannot be resolved, Reuters reported.