Gold climbs after last week’s rally

Gold climbs after last week’s rally

Gold climbs early Monday after last week’s rally on weaker dollar. The rally was sparked by last week’s signs that the Federal Reserve will begin easing monetary policy next year.

The stock market surged and the dollar and Treasury yields have lost ground since the Fed decision, making gold a more attractive asset for investors. Higher interest rates are typically bearish for gold so an end to interest rates would be bullish for the yellow metal.

But comments Friday from New York Fed President John Williams and Atlanta Fed President Raphael Bostic took some of the wind out of the market’s sails. Williams said the Fed isn’t “really talking about rate cuts right now,” while Bostic took issue with market assumptions about the timetable. 

Investors were awaiting the release of the Fed’s favorite inflation measure, the personal consumption expenditures price index, on Friday for further guidance. The report comes out just before the long holiday weekend for Christmas.

Front-month gold futures gained 1.1% last week to settle at $2,035.70 an ounce on Comex, though the February contract lost 0.5% Friday. Bullion rose 3.2% last month after gaining 6.9% in October and falling 5.1% in September. The metal is up 11% in 2023. The February contract is currently up $0.20 (+0.01%) an ounce to $2035.90 and the DG spot price is $2025.20.

The Fed kept interest rates unchanged at 5.25% to 5.50% last week but signaled an upcoming end to its monetary policy tightening cycle. 

The CME FedWatch Tool shows that 91.7% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged in January, while 8.3% are expecting a 25 basis point cut. But that changes in March, with the central bank widely expected to cut, with another expected in May. The central bank has boosted rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level. 

Bostic said Friday that he expects two rate cuts next year but not starting until the third quarter. 

Investors will take direction from a slew of economic reports this week.

Along with the key PCE report for November, they include durable goods orders, personal income, personal spending and new home sales for November and consumer sentiment report for December on Friday. Revised third-quarter U.S. GDP comes out Thursday along with the index of leading U.S. economic indicators and initial jobless claims for last week.

The November consumer price index report previously showed that inflation slowed last month, and the November  jobs report beat estimates. Fed officials have said they closely watch both inflation and labor market reports when crafting monetary policy decisions. 

Front-month silver futures increased 3.8% last week to settle at $24.15 an ounce on Comex, though the March contract decreased 1% Friday. Silver advanced 12% in November after increasing 2.2% in October and decreasing 9.5% in September. It’s up 0.5% in 2023. The March contract is currently up $0.011 (+0.05%) an ounce to $24.165 and the DG spot price is $23.86.

Spot palladium gained 25% last week to $1,204.00 an ounce after rallying 6.7% Friday. Palladium lost 9.5% last month after dropping 10% in October and rising 3% in September. Palladium has plummeted 33% so far this year.The current DG spot price is up $12.60 an ounce to $1223.50.

Spot platinum advanced 2.4% last week to $949.20 an ounce, though it lost 1.8% Friday. Platinum fell 0.7% in November after gaining 3.5% in October and declining 6.6% in September. Platinum is down 11% in 2023. The DG spot price is currently up $4.70 an ounce to $959.00.

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