Gold clinging above the $1,860 range as investors await the afternoon’s expected rate hike announcement from the Federal Reserve.
Treasury yields strengthened ahead of the central bank’s decision. Today’s expected Fed announcement of a aggressive interest rate increase to combat 40-year highs in inflation is pretty much baked into the price of gold at this point. The thing to watch for today is what the NEXT move by the Fed might be. Investors will be carefully parsing Chairman Jerome Powell’s post meeting announcement this afternoon.
Front-month gold futures rose 0.4% Tuesday to settle at $1,870.60 an ounce on Comex, though the June contract dropped 2.2% in the first two days of the week. Gold decreased 2.2% in April, its worst month since September. It retreated 3.5% in 2021. The June contract is currently down $7.80 (-0.42%) an ounce to $1,862.80 and the DG spot price is $1,864.60.
As noted, almost all investors expect the Fed to raise interest rates to a range of 0.75% to 1%, according to the CME’s FedWatch Tool. The Fed boosted rates by a quarter percentage point to 0.25% to 0.5% in March, in the first hike since 2018.
The Fed’s favorite inflation measure, the U.S. core personal consumption expenditures price index, rose 5.2% in March, according to data released Friday. That’s slightly slower than February’s 5.4% increase, the largest since 1983. While high inflation is prompting the Fed’s more aggressive monetary policy, curbing inflation would also be bearish for gold because the precious metal serves as a hedge against higher costs of goods and services.
The Bank of England is also scheduled to announce a rate decision Thursday.
Gold shrugged of this morning’s disappointing U.S. jobs data. Private payrolls increased by just 247,000 for April, per ADP. That’s well below the estimated 390,000 and a significant decline from March. The monthly report from the Labor Department is due out Friday with their weekly initial jobless claims to be published Thursday.
Gold continued to receive some support from geopolitical uncertainty around the war in Ukraine. Russian troops were pounding the eastern part of the country Tuesday and were apparently poised to annex large swaths. Meanwhile, the European Union prepared to sanction Russian oil. Cases of the coronavirus are also increasing, heightening concerns that the pandemic isn’t over yet.
Front-month silver futures rose 0.4% Tuesday to settle at $22.67 an ounce on Comex, after the July futures contract retreated 1.8% in the first two days of the week. Silver lost 8.2% in April, its worst monthly performance since September. It fell 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently down $0.430 (-1.90%) an ounce to $22.235 and the DG spot price is $22.29.
Spot palladium increased 1.8% Tuesday to $2,290.50 an ounce, though it’s down 2.6% so far this week. Palladium touched a record $3,440.76 in March. Russia produces about 40% of the world’s palladium, and Russia’s Nornickel is the world’s largest supplier of palladium. The metal advanced 2.6% in April after declining 8.5% in March. It retreated 22% in 2021.Currently, the DG spot price is up $10.70 an ounce to $2,294.00.
Spot platinum rose 2.8% Tuesday to $973.70 an ounce and is up 1.7% for the week. The metal retreated 4.4% last month after dropping 4.2% in March. It lost 9.4% last year. The DG spot price is slightly up this morning, +$1.30 currently to $976.20.
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