Gold clinging above $2300 an ounce early Wednesday as the dollar fell but geopolitical tensions mounted.
The U.S. currency advanced for a third session and Treasury yields inched higher, pressuring gold as an alternate asset and making the yellow metal more expensive for holders of other currencies. The moves came after Minneapolis Federal Reserve President Neel Kashkari said it’s likely the central bank will keep interest rates high “for an extended period of time.” High interest rates are typically bearish for gold.
But gold remained elevated on haven demand after Israel seized control of Gaza’s Rafah border crossing with Egypt on Tuesday. Fears increased of a full-scale invasion or that the conflict will expand regionally.
Front-month gold futures fell 0.3% Tuesday to settle at $2,324.20 an ounce on Comex, though the most-active June contract rose 0.7% in the first two days of the week. Bullion gained 2.9% in April after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. The June contract is currently down $4.50 (-0.19%) an ounce to $2319.70 and the DG spot price is $2312.80.
The central bank of China, the world’s largest gold consumer, increased its gold reserves for an 18th consecutive month in April, though the pace of buying slowed, according to official data released Tuesday and reported by Bloomberg.
In economic news, the Bank of England will announce a rate decision Thursday, the same day U.S. initial jobless claims data for last week come out. The European Central Bank will also publish an account Friday of its April policy meeting. U.S. University of Michigan consumer sentiment data comes out the same day.
Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% last week, with forecasts for a rate cut moving to later in the year.
The Fed closely watches both labor market and inflation data when setting monetary policy. The Fed’s favorite inflation measure – the personal consumption expenditures price index – surpassed economists’ estimates for both the headline and core numbers for March. The Fed’s goal is for 2% inflation.
About 91.1% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 8.9% expect a 25 basis point cut. More than 70% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to cut inflation.
July silver futures decreased 0.3% Tuesday to settle at $27.54 an ounce on Comex, and the front-month contract rallied 3.2% in the first two days of the week. Silver rose 7% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract i currently down $0.019 (-0.07%) an ounce to $27.525 and the DG spot price is $27.31.
Spot palladium dropped 1.1% Tuesday to $982.50 an ounce, though it rose 2.9% in the first two days of the week. Palladium declined 5.9% last month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the DG spot price is down $23.70 an ounce to $963.00.
Spot platinum advanced 2.4% Tuesday to $984.80 an ounce and is up 2.4% so far this week. Platinum gained 3.1% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The DG spot price is currently down $15.10 an ounce to $969.30.
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