Gold ebbs as Interest Rate concerns boost

Gold ebbs as Interest Rate concerns boost

Gold ebbs as higher interest rate concerns boost dollar. The yellow metal drifted below the $1900 mark early Wednesday on increased speculation that the Federal Reserve will keep interest rates.

Minneapolis Fed President Neel Kashkari said Tuesday that there’s a 40% chance that the central bank will need to push interest rates “meaningfully higher” to curb inflation, according to an essay he posted to the Minneapolis Fed’s website. Investors are awaiting the release of a key inflation report Friday for further direction.

But U.S. consumer confidence dropped to a four-month low in September, data released by the Conference Board on Tuesday showed, and consumers’ perceived likelihood of a recession in the next year grew. Gold often gets a boost from uncertainty over the economy and geopolitics. The U.S. government is days away from a shutdown unless sharply divided members of Congress can settle on a bipartisan package, as current spending laws are set to expire on Saturday. 

Front-month gold futures dropped 0.9% Tuesday to settle at $1,919.80 an ounce on Comex, though the December contract is down 1.3% so far this week. Bullion is down 2.3% in September after dropping 2.2% in August and rising 4.1% in July. The metal is up 5.1% in 2023. The December contract is currently down $15.60 (-0.81%) an ounce to $1904.20 and the DG spot price is $1886.70.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.4% Tuesday, Reuters reported. 

About 83.6% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November. Just 16.4% expect it to raise rates another 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold. 

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% last week. An end to Fed rate hikes – or a pause – is considered bullish for gold. 

The Fed closely watches data on inflation and the labor market in determining monetary policy. The Fed’s favorite inflation measure, the personal consumption expenditures price index, is due out Friday and may determine future direction. The key U.S. monthly jobs report for September will come out next week.

Front-month silver futures decreased 0.8% Tuesday to settle at $23.20 an ounce on Comex, and the December contract is down 2.7% so far this week. Silver is down 6.5% this month after slipping 0.6% in August and gaining 8.5% in July. It’s down 3.5% in 2023. The December contract is currently down $0.431 (-1.86%) an ounce to $22.765 and the DG spot price is $22.48.

Spot palladium slipped 0.2% Tuesday to $1,242.00 an ounce and has lost 2.2% so far this week. Palladium is up 1.1% this month after sliding 5.3% in August and rising 3.6% in July. Palladium has plummeted 31% so far this year. Currently, the DG spot price is up $9.30 an ounce to $1251.00.

Spot platinum declined 0.9% Tuesday to $911.70 an ounce and has lost 2.7% so far this week. Platinum is down 6.5% this month after advancing 1.7% in August and gaining 5.2% in July. Platinum is down 15% in 2023. The DG spot price is currently down $9.70 an ounce to $902.90.

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