Gold prices rose Friday, bouncing after losses in the previous session, with traders focusing on rising tensions in the Middle East while digesting the latest U.S. inflation data.
At 13:57 ET (18:57 GMT), Spot gold rose 2.2% to $5,032.07 an ounce and gold futures for April rose 2.1% to $5,054.15/oz.
Spot prices tumbled over 3% in the prior session.
Spot silver rose 3.3% to $77.73/oz, after wiping out some 10% in the prior session, while spot platinum rose 2.9% to $2,081.95/oz, climbing back above $2,000/oz after logging deep losses in the prior session.
Safe haven demand helps bullion
Bullion has benefited from some safe haven demand on Friday after a host of reports said Washington planned to deploy a second aircraft carrier — the USS Gerald R. Ford — in the Middle East, as nuclear talks with Iran faltered.
Uncertainty over future U.S. interest rate cuts was a major weight on metal prices, especially after payrolls data showed some signs of resilience in the labor market in January. The dollar came off its weekly lows following Wednesday’s nonfarm payrolls print.
U.S. consumer inflation cools
Data released earlier Friday indicated that headline U.S. consumer prices rose by 2.4% in the twelve months to January, compared to estimates of 2.5% and December’s pace of 2.7%.
On a monthly basis, the Labor Department’s consumer price index increased by 0.2%, versus economists’ expectations that it would match December’s rate of 0.3%.
Stripping out volatile items like food and fuel, core CPI rose 2.5% year-on-year and 0.3% month-on-month, in line with forecasts. In December, the figures stood at 2.6% and 0.2%, respectively.
“The CPI is a (small) net positive (especially since it comes on back of a solid labor report on Wednesday) but really doesn’t change the narrative dramatically (since core was in line),” said analysts at Vital Knowledge, in a note.
Labor market strength and inflation are the Federal Reserve’s two biggest considerations for interest rates.
Relatively high interest rates diminish the appeal of non-yielding assets such as gold, while any strength in the dollar also stands to pressure the yellow metal.
Gold set for weekly gain, silver on track for losses
Precious metals have struggled for direction since a flash crash in late-January, with uncertainty over U.S. interest rates being a key point of pressure.
Gold and silver have swung from gains to losses, and with Friday’s moves, the former is set for a weekly gain while the latter is on track for a three-week losing streak.
Gold’s slump from recent records was initially triggered by U.S. President Donald Trump nominating Kevin Warsh as the next Chairman of the Federal Reserve, with Warsh being viewed as a less dovish pick.
Stronger-than-expected nonfarm payrolls data for January added to concerns over fewer interest rate cuts, while wild price swings in precious metals also dampened their safe haven appeal.
Chinese gold demand a “bubble” – Capital Economics
Capital Economics warned in a note this week that China’s surging gold demand increasingly resembles speculative behavior rather than a rush to safety, raising the risk of further market turbulence.
According to the firm’s analyst, Hamad Hussain, “the growing use of leverage and futures trading to gain exposure to gold in China suggests that the recent increase in Chinese gold demand is more consistent with a speculative bubble inflating.”
The firm believes that dynamic “will probably contribute to higher volatility in the gold market.”
Ambar Warrick and Peter Nurse contributed to this article