Gold prices are just below unchanged this morning, resisting moderate profit-taking and a rally in the dollar. Rising inflation, which should be a tailwind for precious metals, is having little effect. Spot gold was last down $2 an ounce at $1,214.60. At the same time, February gold futures were up $1.70. Spot silver was flat at $17.19, while silver futures were up 8 cents, (+0.48%).
The impact of higher inflation has yet to be felt in the precious metals markets due in no small measure to the strength of the U.S. dollar. The expected support for higher gold prices is also being offset by profit-taking. It makes sense that traders would like to make a little bit of money on the way up now that gold is back above $1,200 per ounce.
The signs of higher inflation are being observed in the U.S. as well as overseas. December's Consumer Price Index (CPI) reading, which is frequently cited as a standard measure for price inflation, rose by 0.3% in December. This brought the measure to 2.1% on an annual basis, the first 12-month period of inflation above 2% since the middle of 2014.
The markets will naturally be listening closely to what Fed chair Janet Yellen says in her remarks at a gathering in San Francisco today. She will speak at 3 pm EST, following Minneapolis Fed President Neel Kashkari at 11 am EST. Meanwhile, many of the big wigs in global finance will be in Davos, Switzerland for an annual convention focused on economic policy.
The dollar rebounded a bit from its recent slide, advancing about 0.3% on the DXY index on Wednesday. So far in 2017, the U.S. dollar is actually the third-worst major currency in the world, behind only the Mexican peso and the British pound sterling. The pound surged in trading yesterday after the country's new prime minister, Theresa May, reiterated her desire for a "hard Brexit" from Europe. Although this would normally be seen as bad news for the U.K. financial markets, the degree of certainty and clarity it added was taken as positive.
In the crude oil market, Tuesday saw Brent and WTI crude take divergent paths. The former lost over 0.6% during the trading sessions yet the latter actually gained 0.3%. The mixed performance for these crude benchmarks narrowed the gap between the two. Stock markets in the U.S. all closed in the red on Tuesday, but were trending higher on Wednesday.
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