- Golden morning for miners as inflation leads bullion to almost US$1900/oz
- All Ords gold sub-index up almost 1.8% in morning trade
- Materials lifts 0.57%, but is overshadowed by energy stocks after oil and gas prices rise
Gold is tantalisingly close to US$1900/oz, with the lowest inflation print since October 2021 ushering in hopes of a lighter touch from the US Fed on rate rises in 2023.
The Fed has issued eight consecutive rate rises to calm inflation which hit levels not seen in over four decades last year, lifting interest rates at 75bps on multiple occasions to tame the beast.
The consumer price index for all urban consumers fell 0.1% on the previous month and was up 6.1% over the year, with core inflation (minus food and energy) at 5.7%, down from 6% in November and 6.6% in September.
“Slowing US inflation does not mean monetary policy can stop tightening just yet, but it does indicate a slower pace can be justified,” ANZ’s Jack Chambers said in a note.
“Following the release of the latest inflation data, Philadelphia Fed President Patrick Harker said the Fed should lift rates at 0.25% increments.
“Several Fed officials have indicated they would like to see rates slightly above 5.0% which indicates a further three 25bp lifts.
“We are forecasting two more 25bp lifts, which is aligned with market expectations.”
That’s good news for gold
The US dollar gold price has lifted more than 5% over the past month in anticipation of precisely this happening.
Rates rising is a bad situation for gold investors since as it makes gold relatively more expensive to hold against interest bearing cash and the US dollar.
“A weaker USD as a result of a less hawkish Fed saw investor appetite for the precious metal rise,” Chambers said.
“This was supported by lower yields on Treasuries. The rally in gold lifted the rest of the sector.”
While bullion lifted 0.7% to a touch under U$1897/oz, its poorer cousin silver rose 1.6% to US$23.85/oz, with palladium prices also rising.
The All Ordinaries gold sub-index was up 1.77% at 12pm AEDT today, with Northern Star (ASX:NST), AngloGold Ashanti (ASX:AGG), Westgold (ASX:WGX), De Grey (ASX:DEG) and Ramelius (ASX:RMS) among the standouts.
Some companies are already taking advantage of the higher gold price, with Kalgoorlie-based gold tiddler Beacon Minerals (ASX:BCN) locking in 6000oz of forward sales with Swiss firm MKS hedged at an average net gold price of $2729/oz, 70% of its budgeted production from February to April.
The ASX materials sector lifted 0.57%, while energy stocks rose 2.03%, led by a string of rebounding coal miners and Santos (ASX:STO), which was up 3.58% after oil and gas prices lifted overnight.