Gold turns higher as investors head for havens after hot U.S. inflation report

Precious metals climb with copper and platinum leading market higher
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Gold prices headed higher Friday as investors turned to safe havens following a hotter-than-expected reading on U.S. May inflation numbers, but not before briefly tumbling to their lowest levels in three weeks early in the session.

Price action
  • Gold futures expiring in August
    GCQ22,
    +1.33%
    surged $20.50, or 1.1%, to $1,873.20 per ounce, after earlier touching their weakest level for the most actively traded gold contracts since May 19, according to FactSet data.

  • Silver futures for delivery in July
    SIN22,
    +0.66%
    rise 11 cents, or 0.5%, to $21.93 per ounce, after sinking to their lowest level since May 16.

  • Platinum futures for delivery in July
    PLN22,
    -0.18%
    were down 0.2%, tat $974.20 per ounce, extending its decline this week to nearly 6%.

  • Palladium prices for September delivery
    PAU22,
    -0.14%,
    now the active contract, were down 0.4% to $1,908.00

What analysts are saying

“Ordinarily, the pattern has been that a strong dollar — like today — and when bond yields are up, you have less support for gold,” said Peter Cardillo, chief market economist at Spartan Capital Securities, by phone. “Today, the opposite is happening because of the real ugly inflation data we got.”

Stocks plunged Friday after the U.S. May inflation report, with the S&P 500
SPX,
-2.72%
off 2.5% at mid-session. The CPI data showed the cost of living in the U.S. climbed 1% in May on the back of higher rents, gas and food prices, keeping the rate of U.S. inflation at its highest level in more than 40 years.

The headline reading came in at 8.6% annualized, topping the previous cycle high seen in March. Gold, Treasury yields
TMUBMUSD10Y,
3.167%
and the dollar shot higher Friday, with investors scrambling for safety on concerns about the economic spillover from the surging cost of living and the Federal Reserve’s likely response.

“Hopes for confirmation of peak core inflation have been crushed,” said  Louis Navellier, co-founder of Navellier, in a daily client note. “The market reaction has been swift and severe.” 

In response to the high inflation reading, economists at Barclays said they expect the Federal Reserve next week to pull the trigger on a fed funds rate increase of 75 basis points at their June 14-15 policy meeting, up from the 50-basis-point increase earlier telegraphed.

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