Gold declines from a five-month high early Monday as investors switched their focus to upcoming economic data from the conflict in the Middle East.
Prices have rallied more than 8% in the two weeks since the Israel-Hamas war began, but an anticipated ground war hasn’t yet begun, and humanitarian aid began to trickle into the Gaza Strip, allaying immediate fears of a spreading conflict. The possibility that the war could become regional has kept prices elevated since gold is a traditional hedge against geopolitical uncertainty, but investors are once again turning to the economy for direction.
Front-month gold futures rose 2.7% last week to settle at $1,994.40 an ounce on Comex after the December contract advanced 0.7% Friday. Bullion is up 6.9% so far this month after falling 5.1% in September and dropping 2.2% in August. The metal is up 9.2% in 2023. The December contract is currently down $6.20 (-0.31%) an ounce to $1982.20 and the DG spot price is $1972.40.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.8% Friday, Reuters reported. Meanwhile, speculators in Comex gold switched to net long positions in the week ended Oct. 17 from net short positions the prior week, according to the U.S. Commodity Futures Trading Commission’s weekly Commitments of Traders report.
The Federal Reserve’s favorite inflation measure, the personal consumption expenditures price index, will come out Friday with September data and will likely influence the Fed’s upcoming monetary policy decision. The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to curb inflation. The central bank held its benchmark interest rate at 5.25% to 5.50% in September.
Investors overwhelmingly expect the Fed to keep interest rates unchanged in November following signals from Fed Chair Jerome Powell last week. Lower interest rates – or a pause in rate hikes – is considered bullish for gold because the yellow metal comes under pressure when rates go up and other assets become more attractive.
About 98.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November, while 1.6% expect it to cut rates by 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold.
Investors will also be closely tracking developments in the Middle East this week and the release of other key economic news, including U.S. third-quarter GDP, a rate decision from the European Central Bank and global flash PMI indicators.
Front-month silver futures gained 2.7% last week to settle at $23.50 an ounce on Comex after the December contract advanced 2.1% Friday. Silver has increased 4.7% so far this month after decreasing 9.5% last month and slipping 0.6% in August. It’s down 2.2% in 2023. The December contract is currently down $0.284 (-1.21%) an ounce to $23.220 and the DG spot price is $23.02.
Spot palladium fell 3.3% last week to $1,122.00 an ounce after it lost 0.6% Friday. Palladium has dropped 11% in October after rising 3% last month and sliding 5.3% in August. Palladium has plummeted 38% so far this year. The DG spot price is currently up $3.30 an ounce to $1126.50.
Spot platinum gained 2.1% last week to $906.00 an ounce after it increased 0.3% Friday. Platinum is down 0.5% in October after declining 6.6% last month and advancing 1.7% in August. Platinum is down 15% in 2023. The DG spot price is currently down $7.50 an ounce to $897.30.
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