Gold Bounces Back

Gold Bounces Back

Gold bounces back after bowing to a stronger dollar at the beginning of the trading day. The currency was unable to maintain its initial jump that driven by bets that OPEC’s surprise output cuts could bump global energy prices and force a hike in interest rates. Gold reclaimed its ground near the $2,000 mark – following its best month since July 2020.

The dollar and Treasury yields rose, pressuring gold, after OPEC announced a 1 million barrel a day production cut. Investors awaited further direction from the release of the key first-of-the-month U.S. manufacturing report from the Institute for Supply Management. 

Data released Friday showed the Fed’s favorite inflation measure, the personal consumption expenditures price index, rose slightly less than economists expected in February, signaling that the Federal Reserve’s moves to curb inflation with interest rate increases seem to be working. Consumer spending also moderated. The data triggered increased speculation that the Fed may pause or halt interest rate hikes, a move that would be seen as supportive for gold. 

June gold futures dropped 0.8% last week to settle at $1,986.20 an ounce on Comex as the front-month contract slid 0.6% Friday. Bullion gained 8.1% last month after decreasing 5.6% in February, its worst performance since June 2021. Gold increased 8.8% in the first quarter. The metal fell $2.40 in 2022. The June contract is currently up $9.50 (+0.48%) an ounce to $1995.70 and the DG spot price is $1979.40.

The PCE price index gained 5% in February from a year earlier, a deceleration from January’s 5.3%, though still a long way from the Fed’s 2% goal. The so-called core PCE, excluding food and energy, increased 4.6%, in line with the smallest increase since October 2021. Consumer spending rose 0.2% in February after the largest increase in almost two years in January.

The next key report on the economic calendar is the U.S. monthly jobs report for March, which comes out Friday. Fed policymakers have said they track both the inflation and labor market statistics when determining monetary policy. 

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%. 

About 59.6% of investors tracked by the CME FedWatch Tool are betting that the Fed will boost interest rates by 25 basis points at the central bank’s next policy meeting in May, while 40.4% anticipate the central bank will keep rates unchanged. 

Silver May futures gained 3.5% last week to settle at $24.16 an ounce on Comex after the metal advanced 0.7% Friday. Silver increased 15% in March after retreating 12% in February. It edged up 0.5% in the first quarter. It advanced 3% in 2022. The May contract is currently down $0.016 (-0.07%) an ounce to $24.140 and the DG spot price is $23.99.

Spot palladium rallied 2.8% last week to $1,493.50 an ounce, though it slipped $1 Friday. Palladium rose 3.7% in March after plummeting 14% in February. It fell 17% last quarter. Palladium lost 5.7% in 2022. Currently, the DG spot price is up $25.00 an ounce to $1519.00.

Spot platinum gained 1.2% last week to $999.80 an ounce after rising 0.3% Friday. Platinum increased 3.7% last month after retreating 5.9% in February. It’s dropped 6.6% in the first quarter. Platinum surged 10% in 2022. The DG spot price is currently down $10.00 an ounce to $993.80.

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