Gold Climbs on weaker dollar

Gold Climbs on weaker dollar

Gold climbs early Wednesday on a weaker dollar and dovish comments by the Fed. The dollar eased off a one-month high, making the precious metal a more attractive investment to holders of other currencies.

Federal Reserve Chairman Jerome Powell said in an interview Tuesday that the central bank has more work to do in combatting inflation, particularly given the robust labor market, but investors didn’t find much that was unexpected in his remarks, keeping gold prices slightly elevated.  

Front-month gold futures rose 0.3% Tuesday to settle at $1,884.80 an ounce on Comex, and the April contract is up 0.4% so far this week. Bullion increased 6.5% in January after gaining 3.8% in December and increasing 7.3% in November. It was the longest consecutive monthly rally since July 2020. The metal fell $2.40 in 2022. The April contract is currently up $8.7 (+0.46%) an ounce to $1893.50 and the DG spot price is $1878.10

Powell said that the strong January U.S. jobs report, released last week, was even better than expected, giving the Fed more leeway to raise interest rates to rein in inflation. Though he did acknowledge that “the disinflationary process has begun.”

The Fed raised rates by 25 basis points last week to 4.50% to 4.75%. The move followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November.

Most investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by another 25 basis points in March. The tool shows 93.7% of investors anticipating a 25-basis-point hike, with the remaining 6.3% expecting the Fed to raise rates by 50 basis points to 5.00% to 5.25%. 

Minneapolis Fed President Neel Kashkari told CNBC Tuesday that he still wants to see the Fed raise rates to 5.4%. 

New York Fed President John Williams,  Fed Governor Lisa Cook, Fed Vice Chair Michael Barr, Atlanta Fed President Raphael Bostic, Kashkari and Fed Governor Christopher Waller are all scheduled to speak Wednesday. 

Smaller rate hikes – and cuts – are seen as bullish for gold, while larger hikes are bearish. That’s because higher rates diminish gold’s attractiveness as a haven asset.

Front-month silver futures dropped 0.3% Tuesday to settle at $22.18 an ounce on Comex, and the March contract dropped 1% in the first two days of the week. Silver fell 0.9% in January after rising 10% in December and increasing 14% in November. It advanced 3% in 2022. The March contract is currently up $0.288 (+1.30%) an ounce to $22.465 and the DG spot price is $22.41.

Spot palladium rose 3.7% Tuesday to $1,669.00 an ounce and is up 1.8% so far this week. Palladium dropped 7.5% in January after tumbling 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is down $3.00 an ounce to $1668.50.

Spot platinum increased 0.4% Tuesday to $982.00 an ounce and advanced 0.1% in the first two days of the week. Platinum retreated 4.3% in January after increasing 3.4% in December and rising 11% in November. It surged 10% in 2022. The DG spot price is currently up $2.70 an ounce to $990.90.

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