GOLD
February gold futures advanced to the highest level since December 12. This increase came as signs of easing inflation in the US revived expectations of a potentially more accommodative Federal Reserve policy this year.
Inflation reports earlier this week came in softer than expected. The December producer price index increased 0.2% when up 0.3% was expected, and the producer price index excluding food and energy was unchanged when up 0.2% was anticipated. There was additional strength when traders focused on the bullish December consumer price index excluding food and energy report, which showed a 0.2% increase when up 0.3% was expected. The headline consumer price index showed an increase of 0.4% when up 0.3% was anticipated. The softer than forecast consumer price index report gives latitude to the Federal Open Market Committee to be more accommodative.
Today’s reports were jobless claims in the week ended January 11 at 217,000 when 212,000 were expected. Retail sales in December increased 0.4% when up 0.5% was anticipated. The January Philadelphia Federal Reserve manufacturing index was 44.3 when -7 was estimated. Import prices in December increased 0.1% as forecast, and export prices increased 0.3% when a gain of 0.2% was expected.
Prices are higher despite the agreement of a ceasefire and hostage deal between Israel and Hamas, which is has lessened some of gold’s appeal as a safe-haven asset.
SILVER
March silver futures advanced to the highest level since December 12 as softer inflation data in the U.S. fueled expectations of further interest rate cuts by the Federal Reserve this year. Core inflation unexpectedly eased in December, while headline inflation remained in line with forecasts. The possibility of lower U.S. interest rates could boost commodity demand by encouraging economic growth.
The metal’s value remains supported by improving industrial demand, especially in renewable energy and electronics, as well as ongoing concerns over supply.
COPPER
March copper futures climbed to the highest level since November 8. This surge was driven by a surprise decline in U.S. core inflation, which bolstered expectations for further interest rate cuts by the Federal Reserve this year. Lower U.S. interest rates could boost demand for commodities by supporting economic growth.
In addition, optimism grew over China potentially implementing aggressive fiscal and monetary measures to stimulate consumption. On the supply side, Chile, which is the world’s leading copper producer, reduced its production forecasts for the coming years due to challenges in discovering and developing new deposits. However, traders remained cautious ahead of U.S. President-elect Donald Trump’s inauguration on January 20, concerned that potential new tariffs could disrupt global trade and weigh on market sentiment.
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