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Metals Stocks: Gold ends higher Friday, books strong weekly gain as investors head for havens after hot U.S. inflation report

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Gold prices closed 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,
+1.27%

surged $25.70, or 1.2%, to settle at $1,875.50 per ounce, marking the highest settlement for the most-active gold contract since May 5, according to FactSet data.

Silver futures for delivery in July
SIN22,
+0.50%

gained cents, or 0.5%, to close at $21.93 per ounce, after sinking to their lowest level since May 16.

Platinum futures for delivery in July
PLN22,
-0.40%

fell 0.5%, closing at $975.90 per ounce, extending the decline for the most-active contract this week to 4.1%.

Palladium prices for September delivery
PAU22,
-0.48%
,
now the active contract, shed 0.4% to close at $1,907.00.

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,
-2.14%

off 2% in afternoon trade. 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 and the dollar
DXY,
+0.91%

shot higher Friday, with investors scrambling for safety on concerns about 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.” 

“Gold prices hit a three-week low early on today and then reversed course and powered to a four-week high, to produce a technically bullish ‘outside day’ up on the daily chart, and also produced a technically bullish weekly high close,” said Jim Wyckoff, senior analyst at Kitco.com, in emailed comments to MarketWatch.

“Now, the table is set for some follow-through technical buying in gold early next week, as bulls have regained momentum.”

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.

See: ‘Catastrophically bad’ inflation report is boosting chances of a 75 basis point hike in June or July

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