Gold Prices Pull Back on Weak Economic Data and Hot Inflation Reports

Arjan Schreur Mar 16, 2024
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Gold prices retreated after hitting an all-time high price last week as volatility was the theme across most asset markets. The equities market hit some turbulence during the March triple-witching OPEX week leading the S&P 500 to close in the red for the second consecutive week. Bitcoin was also volatile with multiple drawdowns of more than 5.0% although the crypto markets have been resilient and fast to recover any losses. 


Economic data came in hotter-than-expected with both the CPI and PPI indexes for February showing that inflation is still very much above the Fed’s 2.0% target. CPI rose by 3.2% on a year-over-year basis and PPI rose by 1.6% since last year, the highest increase since September. The PPI is one of the Fed’s preferred measures of inflation and could have an impact on the FOMC meeting next week. The odds for a June rate cut also fell this week and in a corresponding move, 10-year treasury bond yields rose back to a closing rate of 4.19% on Friday. 


The University of Michigan’s Consumer Sentiment reading also fell to a score of 76.5. This was lower than the consensus analyst estimate of 77.1. The US Dollar Index also had a strong close to the week adding additional pressure on the price of gold. 


Overall, gold prices did hold fairly strong despite the volatile week. Gold futures could continue to consolidate in this range until it is ready for the next leg higher. With some expected volatility in equities and Bitcoin hitting upper resistance, gold prices will likely hold the line. For the week, gold COMEX April 2024 futures contracts settled at a price of $2,159.40. 


Precious Metals Stocks and ETFs Weekly Performance

Gold mining stocks saw another positive week which is to be expected with the current elevated price levels of the underlying metal. The MIGL Gold Miner’s Index rose on Friday as we saw a bit of a rotation out of high-growth sectors into oversold value stocks. This is likely due to the hot inflation figures and uncertainty about when the Fed will begin cutting rates.


On Friday, 15 of the 20 components in the MIGL Index finished in positive territory. Some standouts in the index included Equinox Gold Corp (EQX) and NovaGold Resources (NG) which rose by 4.62% and 6.18% respectively during the session. 


A broader play on gold miners is the Van Eck Gold Miners Index ETF (GDX) and the Van Eck Junior Gold Miners Index (GDJX). Both ETFs posted gains this week with the GDX adding 1.18% and GDJX climbing by 2.57%. Both funds are still in negative territory for the week but the higher price of gold should help to elevate them in the coming months. 

The MISI Silver Miners Index had a strong close to the week as Silver futures continued to rise. All nine components of the Silver Miners Index rose on Friday and the iShares Silver Trust ETF (SLV) gained 3.18% for the week. Why the bullishness for silver stocks? The Silver COMEX May 2024 futures contracts rose by nearly a dollar per ounce this week to close at $25.405. 


What’s in Store Next Week for Precious Metals?

Next week we’ll get the latest FOMC interest rate decision although it is widely believed that this will be a non-factor. The first-rate cut isn’t being priced in until at least June or July now, but this could be pushed forward if inflation remains hotter than expected.

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