Gold drifts lower Monday despite Fed speculation and a slightly stronger dollar. Investors are closely watching the central bank after hints last week that it may begin to slow the pace of interest rate hikes following the November meeting.
San Francisco Fed President Mary Daly said Friday that Fed policymakers should start planning for a time when they can implement smaller interest rate hikes, though she said that time hasn’t yet arrived.
The Fed has raised interest rates by 300-basis-points so far this year to 3% to 3.25%, following increases of 75-basis-points each in June, July, and September. There are two more meetings left this calendar year, and the central bank is widely expected to announce another 75-basis-point hike in November to rein in the highest inflation in more than 40 years.
Higher interest rates are typically bearish for gold, though the underlying inflation is bullish.
Front-month gold futures rose 0.5% last week to settle at $1,656.30 an ounce on Comex, after the December contract advanced 1.2% Friday. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 9.4% this year. The current December contract is down $4.30 (-0.26%) an ounce to $1652.00 and the DG spot price is $1650.50.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% Friday to 928.10 metric tons, Reuters reported.
Daly said the Fed should be “considering” a slowdown “at this point, but the data haven’t been cooperating,” according to a Bloomberg report of her remarks at the University of California at Berkeley. At next week’s meeting, “we might find ourselves, and the markets have certainly priced this in, with another 75 basis-point increase, but I would really recommend people don’t take that away as it’s 75 forever.”
Investors are now betting there’s a 95.3% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with the remaining 4.7% projecting a 50-basis-point hike, according to the CME FedWatch Tool. A month ago, just 72.9% of investors anticipated a 75-basis-point increase, with 27.1% predicting a 50-basis-point hike.
The next big data release economists are anticipating is the personal consumption price index for September – the Federal Reserve’s favorite inflation measure.
In other economic news this week, investors will be watching for the release of the S&P manufacturing and services PMI data on Monday, consumer confidence data on Tuesday, new home sales on Wednesday, and third-quarter initial jobless claims and real GDP on Thursday.
Front-month silver futures gained 5.5% last week to settle at $19.07 an ounce on Comex. The December contract increased by 2% Friday. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 18% this year. Currently, the December contract has tipped up $0.054 (+0.28%) an ounce to $19.120 and the DG spot price is $19.30.
Spot palladium rose 0.8% last week to $2,039.00 an ounce, though it dropped 2.3% Friday. Palladium rose 5.9% last month and 13% in the third quarter. It’s up 6.5% in 2022. The current DG spot price is down $15.00 an ounce to $2017.50.
Spot platinum advanced 4.1% last week to $943.40 an ounce after rallying 2% Friday. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 3.1% this year. The DG spot price is down $5.70 an ounce to $934.20.
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