Gold Climbs On Safe Haven Boost

Gold Climbs On Safe Haven Boost

Gold climbs on safe-haven boost as global markets continue to be shaky. The yellow metal is climbing off of Wednesday’s dip when the dollar strengthened to new 20-year highs amid expectations of more aggressive rate hikes from the Federal Reserve.

Chicago Fed President Charles Evans said Tuesday that he expects the central bank will need to raise interest rates to a range of 4.50% to 4.75% to subdue skyrocketing inflation. The key interest rate is currently at 3% to 3.25%, the highest level since early 2008, after the latest increase last week. Evans had previously advocated that rates could peak at 4%.

Higher interest rates are bearish for gold because they make the yellow metal less attractive as an alternate investment. So does a strong dollar, which has gotten a boost from the aggressive monetary policy. 

Front-month gold futures edged up 0.2% Tuesday to settle at $1,636.20 an ounce on Comex, though they dropped 1.2% in the first two days of the week. Bullion is down 5.2% so far this month after losing 3.1% in August and 1.4% in July. The metal retreated 3.5% in 2021. The December contract is currently up $22.30 (+1.36%) to $1658.50 and the DG spot price is $24.90.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% Tuesday to 940.86 metric tons.

Other Fed officials also indicated that the central bank needs to keep raising interest rates almost a week after the Fed’s latest 75-basis-point rate increase.

St. Louis Fed President James Bullard said “more increases are indicated” to get inflation down to the Fed’s 2% target, while Minneapolis Fed President Neel Kashkari said the bank should follow through on the rate increases it has already indicated. 

Investors are betting there’s a 56.5% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with 43.52% projecting a 50-basis-point hike, according the CME FedWatch Tool. The Fed raised rates by 75 basis points each in June, July and now September and has increased rates by 300 basis points so far this year. 

Front-month silver futures dropped 0.8% Tuesday to settle at $18.34 an ounce on Comex, bringing the December contract’s two-day decline to 3%. Silver is up 2.5% this month after tumbling 12% in August and slipping 0.8% in July. It retreated 12% in 2021. Silver prices are tied to industrial demand. The December contract is currently up $0.263 (+1.43%) an ounce to $18.600 and the DG spot price is $18.74.

Spot palladium increased 1.5% Tuesday to $2,112.00 an ounce and is up 0.8% so far this week.  Palladium is up 1.3% this month after retreating 3.3% in August and rising 9.9% in July. It dropped 22% in 2021. Currently, the DG spot price is up $18.60 an ounce to $2136.00

Spot platinum lost 0.2% Tuesday to $859.90 an ounce and dropped 0.9% in the first two days of the week. Platinum is up 1.1% this month after tumbling 6.1% in August and decreasing 0.3% in July. It fell 9.4% last year. The DG spot price is currently up $7.60 an ounce to $866.10.

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