Gold shines as traders count down to ‘critical’ CPI, Dalio buys

Gold held gains as the dollar slipped, with investors counting down the hours before key U.S. inflation data that may offer fresh clues on monetary tightening. Adding luster for the metal, filings showed billionaire hedge fund manager Ray Dalio increased holdings last quarter.

Bullion for immediate delivery rose as much as 0.6 percent to $1,337.02 an ounce, the highest since Feb. 6, and was at $1,330.92 at 10:32 a.m. in London. Gold’s about 2 percent higher this year. The Bloomberg Dollar Spot Index fell for a fourth day, the worst run in a month, and is down 2.9 percent in 2018.

There are “some G-10 traders arguing this is the most significant economic release in the past three years,” Stephen Innes, Singapore-based head of trading for Asia Pacific at Oanda Corp., said in a daily markets note. Oanda cited “last week’s market carnage in the wake of an inflationary uptick in wage growth.”

Global markets from commodities to equities to bonds were whipsawed last week after the Feb. 2 wage data spurred investors to reappraise the outlook for global inflation and weigh consequences for monetary policy and asset valuations. Bullion fell as share markets tumbled, but has regained some ground since Monday. New Federal Reserve Chairman Jerome Powell has suggested the central bank will push ahead with hikes even as it remains on the lookout for threats to the financial system in the wake of the selloff.

‘Hard to Predict’

“Gold’s reaction to inflation data is profoundly hard to predict,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp. “Given how markets have been pricing in more Fed rate hikes into 2018, faster-than-expected inflation pressures would likely persuade higher policy rates across key central banks and pressure prices lower, rather than lift gold’s status as an inflation hedge.”

Data this week showed Dalio’s Bridgewater Associates raised its stake in SPDR Gold Shares and iShares Gold Trust in the final quarter of 2017. That filing followed comments on Monday, when the fund manager said that risks of a recession in the next 18 to 24 months are rising. Last year, he recommended investors consider placing 5 percent to 10 percent of assets in gold.

The dollar fell on Wednesday, with the yen hitting a 15-month high, amid concern a faster-than-expected inflation result will trigger selling of U.S. shares and weigh on the country’s currency. This month, hedge fund head Paul Tudor Jones said inflation is about to appear “with a vengeance” and may force the Fed to accelerate interest rate hikes.

“With the U.S. dollar once again striking a bearish chord among G-10 traders, the long gold set up looks favorable,” Oanda’s Innes wrote. “However, with nearly 100 percent of gold’s appeal trading off the back of U.S. dollar weakness, the U.S. CPI reading could be a day of reckoning for gold bulls.”

— With assistance by Eddie Van Der Walt.