Gold fell on Friday as US Treasury yields climbed from near a three-month low and the US dollar strengthened. The metal erased some short-lived gains that were made in the wake of a US inflation report.
Thursday’s US report on the consumer price index (CPI) showed that price increases were largely driven by categories associated with economic reopenings, bolstering the view that inflation pressures might ease later in the year.
With the US Federal Reserve setting a high bar for reconsidering its dovish stance, the data ended up stoking risk appetite across global markets — pressuring demand for bullion as a haven.
Spot gold lost 1.2 percent to US$1,876.03 an ounce in New York, after climbing 0.5 percent on Thursday. It fell 0.9 percent for the week, its second straight weekly loss.
Futures for August delivery on Friday fell 0.9 percent to settle at US$1,879.60.
Spot silver, platinum and palladium all declined. The Bloomberg Dollar Spot Index rose 0.5 percent.
“Gold’s failure to break $1900/oz despite the surprise non-farm payrolls and CPI inflation prints should catalyze some CTA selling as upside momentum wanes,” TD Securities analysts led by Bart Melek wrote in a note.
Bullion is holding near US$1,900 an ounce, with market reaction suggesting that traders are aligning with the Fed’s view that inflationary pressures are temporary and that any changes in ultra-accommodative policy would happen gradually.
Investors would now turn their attention to the Fed’s meeting on Tuesday and Wednesday for guidance on its policy path.
Also on Thursday, European Central Bank President Christine Lagarde renewed a pledge to deliver faster bond buying even as officials acknowledged for the first time since 2018 that the eurozone economy is no longer overshadowed by risks to its growth outlook.
STEEL
The steel industry is booming like never before as the global economy recovers from the COVID-19 pandemic, and the ripple effects are being felt by everyone from home builders to appliance makers.
Demand is so frenzied that US mills have stopped taking orders from customers, said Dan DeMare, director of sales at Heidtman Steel Products Inc.
DeMare said the mills might not begin taking new orders until late summer so that they can clear backlogs.
In a global economy already shaken by supply shortages and inflation worries, the mills’ moves might signal more delivery snags and even higher prices for a commodity key to a wide swath of industries.
Across the world, about 227kg of it is used per person each year, in everything from paper clips and automobiles to skyscrapers and toasters.
Steel in the US has tripled in 12 months as the swifter-than-expected economic recovery caught producers by surprise, while in China futures reached a record after authorities pledged to lower output in a push to control emissions. Prices have also surged in Europe.
“The sharpness and speed of the moves has been something like I’ve never seen before,” Phil Gibbs, an analyst at Keybanc Capital Markets Inc in Cleveland, Ohio, said in a telephone interview. “I’ve been covering this space now close to 15 years, so I’ve seen some pretty crazy runs.”
While prices have surged across commodities, the 220 percent jump in US steel in the past year eclipses other high-fliers such as copper and crude oil.
A Standard and Poor’s index of steel companies, which includes Nucor Corp, Cleveland-Cliffs Inc and US Steel Corp, is up 69 percent this year, easily the benchmark’s best performance through the first five months of the year.
The rally seemed unimaginable to steel executives just 10 months ago, who said it could be at least next year before metal demand would return to pre-pandemic levels.
The quick recovery and slow ramp-up of steel plants drained inventories that were already low during the height of the pandemic.
Lumber, a market where producers were also caught short amid a surprise surge in housing demand, is one of the few materials with comparable gains. Even home builders are having to reckon with the impact of tight steel supplies.
Carl Harris, who has spent 36 years building homes, said he is looking at two-month delays on refrigerators, ranges and dishwashers. Delivery times that are normally two to three weeks are now as much as six months in many parts of the US, he said.
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