Metals Stocks: Gold sinks to fresh 9-month low after June inflation number

Price action

• Gold futures
  GC00,
  -0.01%

  GCQ22,
  -0.01%
  for August delivery slumped $15, or 0.8%, to $1,710.

• Silver futures
  SIU22,
  +0.33%
  for September delivery shed 8 cents, or 0.4%, to $18.88.

• Platinum futures
  PLV22,
  -0.28%
  for October delivery inched lower, losing $7.70, or 0.9%, to $820 per ounce.

• Palladium futures
  PAU22,
  -1.74%
  for September delivery fell $10, or 0.5%, to $2,005.

• Copper futures
  HGU22,
  -1.09%
  for September delivery fell 3 cents, or 0.8%, to $3.26 per pound.

Analyst reaction

Just as precious metals analysts had anticipated, gold prices slumped after the U.S. June consumer-price index came in hotter than expected. The headline inflation number for last month showed prices rose at an annualized rate of 9.1%, exceeding expectations of an 8.8% increase.

Futures markets are now pricing in a more than 40% chance of a 100 basis point interest rate hike from the Federal Reserve later this month.

“The U.S. data point of the week, if not the month, saw Wednesday morning’s consumer price index report for June come in very hot,” said Jim Wyckoff, senior analyst at Kitco.com.

Meanwhile, Treasury yields surged on the news, and the U.S. dollar strengthened. Analysts blamed higher yields and the stronger dollar for luring investors away from gold.

Strategists warned that gold could soon break below $1,700 per ounce after the strong inflation number.

“Another bout of US Dollar strength could well see $1675.00 fail, setting up another capitulation trade,” said Jeffrey Halley, senior market analyst for Asia-Pacific at Oanda.

The ICE U.S. Dollar Index
DXY,
+0.19%,
a gauge of the dollar’s strength against a basket of main currencies, was up 0.3%, while the 10-year Treasury yield
TY00,
-0.43%
was up 6 basis points at 3.023%.