Gold clawing back to $1770 as investors buy the overnight dip. The yellow metal had slipped from a three-month high early Monday after a key Federal Reserve official indicated that the central bank wouldn’t soften its approach to combatting inflation.
Prices for the yellow metal surged last week after the October consumer price index report showed inflation growth was slowing. That was read as a signal that the Fed would curb the pace of future interest rate increases. High rates are typically bearish for gold because they make the yellow metal less attractive than other assets.
But Fed Governor Christopher Waller said Monday in Sydney that “we’ve still got a ways to go” before the Fed stops raising interest rates. The central bank has increased interest rates by 375 basis points this calendar year in an effort to curb 40-year highs in inflation. There have been 75-basis-point increases each in June, July, September, and November, and the federal funds rate is now at 3.75% to 4%.
Gold’s early Monday dip was also sparked by the dollar and U.S. Treasury yields ticking up.
Front-month gold futures rose 5.5% last week to settle at $1,769.40 an ounce on Comex after the December contract increased 0.9% Friday. Bullion fell 1.9% in October, its seventh straight month of declines. The metal is down 3.2% this year. The December contract is currently up 2.0 (+0.11%) an ounce to $1771.40 and the DG spot price is $1771.80.
“These [interest] rates are going to stay – keep going up – and they’re going to stay high for a while until we see this inflation get down closer to our target,” Waller said at a UBS conference, according to Bloomberg. “This isn’t ending in the next meeting or two.”
But investors are still largely betting on a slowdown in the pace. Investors are now betting there’s an 80.6% chance Fed policymakers will raise interest rates by 50-basis-points in December, a surge from 56.8% early last week. About 19.4% of investors tracked by the CME FedWatch Tool are projecting a 75-basis-point hike, compared with 43.2% before the CPI report.
Consumer prices rose 0.4% in October from a month earlier, less than the 0.6% economists had forecast ahead of the data release from the Bureau of Labor Statistics. CPI was up 7.7% from a year earlier. Analysts had projected a 7.9% increase. The Fed’s favorite inflation measure, the personal consumption expenditures price index, increased in September.
Front-month silver futures rose 4.3% last week to settle at $21.67 an ounce on Comex, though the December contract slipped 0.2% Friday. Silver advanced 0.4% in October, its second consecutive monthly increase. It’s down 7.2% this year. Currently, the December contract is up $0.153 (+0.71%) an ounce to $21.820 and the DG spot price is $21.88.
Spot palladium gained 9.5% last week to $2,051.00 an ounce after rallying 2.9% Friday. Palladium declined 15% last month. It’s up 7.1% in 2022. The current DG spot price is down $5.50 an ounce to $2046.00.
Spot platinum increased 6.9% last week to $1,031.80 an ounce, though it retreated 1.9% Friday. Platinum gained 7.3% in October. It’s up 6% this year. Currently, the DG spot price is down $13.10 an ounce to $1023.00.
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