Gold holding above $1,600 this morning after rising past that threshold yesterday, trading at a seven-year high, as investors sought safe havens from uncertainty about the coronavirus’s global impact. This morning the yellow metal shook off the U.S. producer prices report that showed a 0.5% jump last month.
The specter of inflation (and a potential interest rate increase) arose this morning when the U.S. Producer Price Index for January grew the most in more than a year. The Labor Department said the PPI jumped 0.5% last month after climbing 0.2% in December. Economists polled by Reuters had forecast a gain of 0.1% in January.
Meanwhile, gold was also unfazed by the U.S. housing data that paints a positive economic picture. Homebuilding fell less than expected last month, while building permits hit a near 13-year high.
On Monday, gold’s virus-driven rally was dampened after reports China was considering using cash injections and mergers to help bail out an airline industry hit hard by the coronavirus outbreak and subsequent travel restrictions. European equities and U.S. stock futures rose amid increased interest from risk-off traders. Gold typically becomes less attractive as an alternate investment when equities advance.
Then yesterday morning, front-month gold futures rose 1.1% to $1,586.40 an ounce on Comex after Apple Inc. warned investors this week that it wouldn’t hit its revenue goals for the first quarter because factories in China were shuttered in response to the coronavirus and have been slow to reopen.
The April contract gained 0.8% last week. There was no settlement Monday as U.S. financial markets were closed for the Presidents Day holiday. Futures advanced 4.3% in January, the best monthly performance since August. Currently, the April Contract is at $1,607.40.
The death and casualty toll from the coronavirus, designated COVID19, slowed Tuesday, though it still went up, particularly in Hubei province, the hardest hit part of the country. Uncertainty about the effect of the coronavirus has propped up safe-haven assets such as gold and the dollar, which is trading near a four-month high.
Investors are waiting to hear more about Federal Reserve policymakers’ thinking about the virus’s economic impact and the economy in general when the minutes of the latest Federal Open Market Committee meeting are released later Wednesday. Fed Chairman Jerome Powell told Congress last week that the disease’s spread may threaten global growth.
The virus is a World Health Organization-designated global health emergency which has killed more than 2,000 people worldwide and sickened more than 75,000. Most of the cases have been in China.
Silver rose 2.4% Tuesday to settle at $18.15 an ounce on Comex, outpacing gold. The March futures increased 0.2% last week. Silver gained 0.5% in January, lagging gold’s advance.
Spot palladium, a metal used primarily in autocatalysts, reached a new record. It rallied 4.3% Tuesday to $2,629.10 an ounce. It climbed 18% last month, setting new records amid a supply crunch. Spot platinum rose 2.3% Tuesday.
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