Gold back above $2000 an ounce on banking news as investors now look toward this Wednesday’s monetary policy decision from the Federal Reserve for further direction. Gold had slipped at the beginning of the trading day on a stronger dollar before climbing back.
JPMorgan acquired all of First Republic’s deposits and a majority of its assets. Regulators had taken possession of First Republic, making it the third American bank failure since March. Alarms bells over First Republic started ringing last month when the bank revealed that it lost more deposits than expected in March.
Fed policymakers are widely expected to announce another 25 basis point interest rate increase to curb inflation. Investors will be closely watching the Fed statement and comments subsequently by Chairman Jerome Powell for indications of whether the Fed plans to pause rate hikes.
June gold futures rose 0.4% last week to settle at $1,999.10 an ounce on Comex after the front-month contract edged up 10 cents Friday. Bullion increased 0.6% in April after gaining 8.1% in March. The metal fell $2.40 in 2022. The June contract is currently up $12.4 (+0.62%) an ounce to $2011.50 and the DG spot price is $2004.80.
Trading volume may be light Monday as many locations in Asia are closed for the May 1 Labor Day holiday.
The Fed’s favorite inflation measure came in higher last week, as did the Labor Department’s measure of employment costs. Both supported the case for another rate hike this week.
The personal consumption expenditures price index, rose 0.3% in March from February, exclusive of food and energy costs, data released Friday by the Commerce Department showed. It increased 4.6% from the year earlier. The Labor Department’s measure of employment costs increased 1.2% in the first quarter from the previous one, topping forecasts. Fed policymakers have said they track both inflation and labor market statistics when determining monetary policy.
Key U.S. labor market reports are due out on Wednesday, Thursday and Friday, largely after the Fed’s decision.
About 86.9% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at the central bank’s next policy meeting, while just 13.1% anticipate the central bank will leave rates unchanged.
Higher interest rates are typically bearish for gold, because they make the yellow metal less attractive as an alternate investment, but a pause or an end to the rate hikes would be bullish.
The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. The federal funds rate is currently at 4.75% to 5.00%.
The European Central Bank is also expected to raise rates for a seventh straight time on May 4.
July silver futures fell 0.2% last week to settle at $25.23 an ounce on Comex, though the front-month contract ticked up 1.7 cent Friday. Silver gained 4.4% in April after increasing 15% in March. It rose 3% in 2022. The July contract is currently up $0.869 (+3.44%) an ounce to $26.095 and the DG spot price is $25.78.
Spot palladium decreased 6.1% last week to $1,524.00 an ounce, though it gained 0.3% Friday. Palladium rose 2% last month after rising 3.7% in March. Palladium lost 5.7% in 2022. The DG spot price is currently down $15.40 an ounce to $1519.50.
Spot platinum dropped 4.2% last week to $1,085.20 an ounce after losing 0.4% Friday. Platinum added 8.5% in May after increasing 3.7% in March. Platinum surged 10% in 2022. Currently, the DG spot price is up $7.30 an ounce to $1092.40.
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