Gold digging in above $2000 ahead of Fed

Gold digging in above $2000 ahead of Fed

Gold digging in above $2000 ahead of Fed meeting later this week, though off one-year highs reached last week, as the U.S. dollar and treasurys gain traction.

Fed Governor Chris Waller said Friday that the central bank needs to continue tightening monetary policy, given persistently high interest rates and a strong labor market. Meanwhile, Atlanta Fed President Raphael Bostic told Reuters that one more 25-basis-point interest rate hike could be the end of the rate increases. Interest rate increases are bearish for gold, which becomes a less attractive alternate investment when rates go down. 

June gold futures fell 0.5% last week to settle at $2,015.80 an ounce on Comex after the front-month contract tumbled 1.9% Friday. Bullion gained 8.1% last month after decreasing 5.6% in February, its worst performance since June 2021. Gold increased 8.8% in the first quarter. The metal fell $2.40 in 2022. The June contract is currently down $2.5 (-0.12%) an ounce to $2013.30 and the DG spot price is $1999.30.

About 83.1% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at the central bank’s next policy meeting in May, while 16.9% anticipate the central bank will leave rates unchanged. Fed policymakers have said they track both inflation and labor market statistics when determining monetary policy. 

The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. The federal funds rate is currently at 4.75% to 5.00%. 

Economic reports released last week boosted speculation of another rate increase. 

U.S. retail sales fell 1% in March from February amid high inflation. Production at U.S. factories fell more than expected in March, at 0.5%, the Fed reported Friday. Economists had forecast a 0.1% decline. Meanwhile, consumer sentiment ticked up for April, even as expectations for inflation rose. 

Consumer price index data released Wednesday showed that annual inflation fell to the lowest rate since May 2021. Data Thursday showed wholesale prices unexpectedly fell in March. 

Silver May futures gained 1.5% last week to settle at $25.46 an ounce on Comex, though the metal retreated 1.8% Friday. Silver increased 15% in March after retreating 12% in February. It edged up 0.5% in the first quarter. It rose 3% in 2022. The May contract is currently down $0.005 (-0.02%) an ounce to $25.455 and the DG spot price is $25.35.

Spot palladium increased 1.7% last week to $1,511.50 an ounce, though it fell 1.9% Friday.  Palladium rose 3.7% in March after plummeting 14% in February. It fell 17% last quarter. Palladium lost 5.7% in 2022. Currently, the DG spot price rose $41.20 an ounce to $1560.50.

Spot platinum gained 2.9% last week to $1,047.40 an ounce, though it lost 1.5% Friday. Platinum increased 3.7% last month after falling 5.9% in February. It dropped 6.6% in the first quarter. Platinum surged 10% in 2022. The current DG spot rose $12.20 an ounce to $1062.20.

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