Gold extends gains, set for bumper week amid softer inflation

By Ambar Warrick

Investing.com -- Gold prices rose for a fourth straight session on Friday following more signs that U.S. inflation was easing, while persistent fears of a 2023 recession also underpinned safe haven demand for the yellow metal.

Data on Thursday showed that U.S. producer price index inflation grew at a slower pace in March, coming a day after data showed consumer price inflation also eased. The readings furthered expectations that inflation was retreating, which could invite a less hawkish Federal Reserve.

The dollar sank to a near one-year low after the data, while Treasury yields also retreated, benefiting gold prices.

Safe haven demand for the yellow metal was also boosted by several warnings on a U.S. recession this year, the prospect of which also spells less hawkish action by the Fed.

Spot gold rose 0.3% to $2,046.61 an ounce, while gold futures rose 0.3% to $2,060.75 an ounce by 22:16 ET (02:16 GMT). Both instruments were set for a fourth straight day of gains, and were also headed for a weekly rise of nearly 2% each.

Gold has been on a tear over the past month, with safe haven flows into the yellow metal being initially sparked by fears of a banking crisis.

While regulatory intervention helped stem concerns over a broader crisis, the collapse of several U.S. banks saw markets pricing in a less hawkish stance from the Fed, as well as a potential recession this year due to economic pressure from high interest rates.

Fed Fund futures prices show that markets are pricing in one more rate hike by the Fed in May, followed by a likely pause in June.

The prospect of a less hawkish Fed benefits gold, given that higher interest rates push up the opportunity cost of holding non-yielding assets.

Other precious metals also advanced on Friday and were set for a strong week. Platinum Futures rose 0.6% to $1,069.15 an ounce, while silver futures rose 0.9% to $26.148 an ounce.

Among industrial metals, copper prices rose sharply, benefiting from a weaker dollar. Sentiment towards the red metal was also aided by optimism over a demand recovery in major importer China.

Copper futures rose 1% to $4.1680 a pound, and were set to add nearly 4% this week.

While China’s copper imports dropped 19% in March, a broader improvement in the country’s imports spurred bets that commodity demand will also pick up in the coming months.