Gold drops off record high

Gold drops off record high

Gold drops off record high early Friday as investors took profits and the dollar rose to a three-week high against rival currencies, putting it on track for a second weekly rise.

The yellow metal reached a record high of $2,220.89 an ounce before paring gains Thursday. Fed policymakers reiterated after Wednesday’s meeting that the central bank expects to cut interest rates three times this year despite reports of higher inflation. Most investors are expecting a rate cut in June – not at the Fed’s next meeting in May. 

Lower interest rates would be considered bullish for the yellow metal, making it a more attractive asset for investors. Gold has also gotten some support in recent weeks from geopolitical uncertainty over the wars in Ukraine and Gaza and by central bank buying led by China. 

Front-month gold futures rose 1.1% Thursday to settle at $2,184.70 an ounce on Comex, and the most-active April contract rallied 1.1% in the first four days of the week. Bullion dropped 0.6% in February after declining 0.2% in January and gaining 0.7% in December. The metal rose 13% in 2023. The April contract is currently down $8.8 (-0.40%) an ounce to $2175.90 and the DG spot price is $2174.80.

About 91.8% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 8.2% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting this week. 

The Fed closely tracks both inflation and labor market data when determining monetary policy. 

Two inflation reports came in hotter than expected last week. The core U.S. consumer price index, the cost of goods excluding volatile food and energy prices, came in above forecasts for the second consecutive month, while the producer price index, which measures wholesale prices, accelerated at a faster-than-expected pace of 0.6%, according to data released by the U.S. Bureau of Labor Statistics. 

“We’ve got nine months of 2.5% inflation, now we’ve had two months of kind of bumpy inflation,” Powell said Wednesday after the meeting. “Now, there were some bumps and the question is, are they more than bumps? And we can’t know that, that’s why we are approaching this question carefully.”

Atlanta Fed President Raphael Bostic is scheduled to speak Friday and may provide further signals on the Fed’s timetable. 

Front-month silver futures fell 0.4% Thursday to settle at $25.01 an ounce on Comex, and the May contract retreated 1.5% in the first four days of the week. Silver lost 1.2% in February after falling 3.8% in January and dropping 6.1% in December. It ticked up 0.2% in 2023. The May Contract is currently down $0.122 (-0.49%) an ounce to $24.885 and the DG spot price is $24.70.

Spot palladium increased 1.3% Thursday to $1,021.00 an ounce and dropped 6.8% so far this week. Palladium fell 4.6% in February after tumbling 11% in January and advancing 8.6% in December. Palladium plummeted 38% last year. The current DG spot price is down $11.40 an ounce to $1010.50.

Spot platinum gained 1.4% Thursday to $916.20 an ounce and has fallen 3.2% so far this week. Platinum decreased 4.9% in February after falling 8% in January and rising 8.1% in December. Platinum dropped 6.8% in 2023. The DG spot price is currently down $7.00 an ounce to $909.00.

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