In early Asian trading on Friday (April 12), spot gold surged slightly, once reaching a new all-time high of $2379.36 per ounce. The price of gold rose by nearly $40 on Thursday, hitting an intraday high of $2377.60 per ounce, closing at $2372.26. Previously, US producer price data fell short of expectations, and the number of renewed jobless claims rose to the highest level since January, boosting hopes that the US will cut interest rates this year. Meanwhile, US officials say they expect Iran to attack Israel, and continued geopolitical concerns have increased the appeal of gold.

David Meger, head of metals trading at High Ridge Futures, said: “The PPI data was slightly lower than expected, which continued the hope that interest rates might be cut before the end of the year — so gold rose. Central bank purchases and geopolitical uncertainty remain the pillars supporting the gold market”.

(Daily chart of spot gold, source: Easy Huitong)

Producer prices in the US rose less than expected in March, easing concerns about a recovery in inflation

Producer prices in the US rose only slightly in March, and the impact of rising service prices was partially offset by falling commodity prices, easing concerns about a recovery in inflation.

A report released by the Department of Labor on Thursday made economists expect that the personal consumption expenditure (PCE) price index, which is favored by the Federal Reserve when formulating monetary policy, will rise only slightly compared to strong consumer price data in March.

High inflation and the continued strength of the labor market prompted financial markets and most economists to postpone expectations for when the Federal Reserve will cut interest rates for the first time from June to September. The minutes of the US Federal Reserve's March 19-20 policy meeting released on Wednesday also showed that policymakers are concerned that progress in inflation may have stalled.

“Producer price data tells us that inflation has not worsened,” said Christopher Rupkey, chief economist at FWDBonds. “Policymakers can stay alert and wait for more data on where inflation is going next. The fall in producer price increases may bring some comfort to consumers in the coming months.”

The US Labor Department's Bureau of Labor Statistics said that the final demand producer price index (PPI) rose 0.2% month-on-month in March, and economists interviewed predicted a 0.3% increase. The February reading confirmed a 0.6% increase. PPI rose 2.1% year on year in March and 1.6% in February.

According to the PPI report, service prices rose 0.3% in March, the same increase as in February. This was mainly due to a sharp 3.1% increase in prices for securities brokerage, trading, investment advice and related services. Portfolio management fees increased by 0.5%. Portfolio management fees, healthcare, hotel and motel accommodations, and ticket prices are all used to calculate the PCE price index.

Commodity prices fell 0.1% in March after jumping 1.2% in February. The wholesale price of gasoline fell by 3.6%. Excluding food and energy, commodity prices rose slightly by 0.1% in March after rising 0.3% in February.

According to PPI and Consumer Price Index (CPI) data, economists expect the core PCE price index to rise only slightly, with unrounded estimates of month-on-month increases between 0.21% and 0.28%. The core PCE price index rose 0.3% month-on-month in February. The indicator's year-on-year increase is expected to slow to 2.7% from 2.8% in February, the smallest in three years.

The overall PCE price index is expected to rise 0.28% month-on-month and 2.6% year-on-year in March. The PCE price index rose 0.3% month-on-month and 2.5% year-on-year in February

After the PPI data was released, traders bet that the Federal Reserve may start cutting interest rates as early as the meeting at the end of July.

However, Boston Federal Reserve Chairman Collins said on Thursday, “Recent data suggests that before starting to relax the policy, it may take more time than I previously thought to be more confident about the downward trajectory of inflation.”

The number of renewed jobless claims rose to the highest level since January

In another report on Thursday, the US Department of Labor said that in the week ending April 6, the number of initial jobless claims fell by 11,000, to 211,000 seasonally adjusted. Economists had previously predicted 215,000 people.

The number of unadjusted applicants increased by 170.37 million last week to 2143.86 million.

The timing of the Easter and Passover holidays changes every year, which also often causes fluctuations in unemployment benefit data. Despite this, last week's data showed that the labor market remained healthy at the beginning of the second quarter. Employment growth accelerated in March, and the unemployment rate fell to 3.8% from 3.9% in February.

The unemployment benefit report shows that in the week ending March 30, the number of renewed jobless claims increased by 28,000 to reach 1.817 million, the highest level since January. The uninsured unemployment rate remained unchanged at 1.2%.

Michael Pearce, deputy chief US economist at the Oxford Institute of Economics, said: “Although recruitment is slowing down, net job growth is still strong due to fewer layoffs in the economy, and judging from unemployment benefit data, there is no sign that the situation is changing.”

US officials expect Iran to attack Israel

A US official said on Thursday evening that the US expects Iran to launch an attack on Israel, but the scale is insufficient for Washington to get involved in the war.

The White House said earlier that Washington does not want the conflict to spread in the Middle East. The US has told Iran that it did not participate in the air strike against Iran's senior military commander in Damascus. The White House said it warned Iran not to use this attack as an excuse to further escalate the situation in the region.

Iranian sources said that Iran has sent a signal to Washington that Iran will respond to Israel's attack on its Syrian embassy in a way aimed at preventing a major escalation of the situation, and Iran will not act hastily. Currently, Tehran has put forward a request including a cease-fire in Gaza.

Iranian Foreign Minister Hossein Amirabdollahian (Hossein Amirabdollahian) conveyed Iran's message to Washington during his visit to the Gulf Arab nation of Oman on Sunday, sources said. Oman often acts as a middleman between Tehran and Washington.

A source familiar with US intelligence was unaware of the information conveyed through Amman, but he said Iran “knows very well” that its response to the attack on its embassy in Syria will be “controlled” and “unescalated,” and plans to “launch a series of attacks against Israel using regional agents.”

These diplomatic messages show that Iran has taken a cautious approach in weighing how to respond to the April 1 attack, not only to prevent Israel from taking further such actions, but also to avoid escalating military actions, so as not to provoke the US.

Iran's Supreme Leader Ayatollah Ali Khamenei (Ayatollah Ali Khamenei) said on Wednesday that Israel “must be punished and will definitely be punished,” adding that this is tantamount to an attack on Iranian territory. Israel has yet to confirm responsibility for the attack, but the Pentagon said it was Israel's fault.

One of the Iranian sources did not rule out the possibility that members of the Iran-backed Axis of Resistance (Axis of Resistance) group could attack Israel at any time. Analysts believe this is a possible means of retaliation.

Sources said that during the meeting in Oman, Abdullahiyan said that Tehran is willing to ease the situation on the premise that it meets requirements, including a permanent cease-fire in Gaza. And Israel, which aims to eliminate Hamas, has ruled out this possibility.

Sources said that Tehran also asked the US to guarantee that if Iran carried out a “controlled attack” on Israel, the US would not intervene. However, the US rejected this request in a response conveyed through Oman.

Sources familiar with US intelligence say that Iran's retaliatory strike will be “non-escalating” for the US, “because they don't want the US to intervene,” which shows that Iran will not instruct its proxy militias in Syria and Iraq to attack US forces stationed in these countries.

James Steel, chief commodity analyst at HSBC, pointed out that the latest rise in the gold market is driven by geopolitical risks affecting the wider market.

“This is the default game,” Steel said. “Specifically, the real estate market is very weak in some regions, and the stock market is also very weak, which narrows down what investors large and small can look for. Gold is a great safe haven.”

Steel stressed that he believes that geopolitical factors have had a very strong impact on the gold market. “We have seen a large influx of safe-haven purchases led by geopolitics, and academic research shows that gold can be a good hedge against geopolitical risks and financial market risks.”

Future market outlook

On this trading day, we need to pay attention to China's trade data for March, China's monthly M2 money supply rate for March, the US monthly import price index rate for March, and the initial value of the US University of Michigan consumer confidence index for April, and news related to the Federal Reserve official's speech and geographical situation.

At 07:52 Beijing time, the current price of spot gold is 2376.70 US dollars/ounce.