Gold clawed back above the $5000 mark, but still extends last week’s losses, as heightened concerns about inflation supported speculation that the Federal Reserve will keep interest rates elevated for most of this year, including at its next policy meeting this week.
Data out Friday showed that even before the war in Iran sent oil prices soaring, the core personal expenditures price index, the which excludes volatile food and energy prices, was up 3.1% in January from the year earlier, the most in almost two years. The Fed has a 2% inflation target. If it fails to cut rates in the near term, that would be bearish for gold, making it less attractive as an alternate investment.
Investors are continuing to watch developments in the Middle East and high oil prices for further direction and will be closely parsing the Fed statement Wednesday for indications on monetary policy. Specifically, they will be following developments related to the closure of the Strait of Hormuz, through which about a fifth of the world’s daily oil consumption passes.
April gold futures fell 1.9% last week to settle at $5,061.70 an ounce on Comex after dropping 1.3% Friday. Bullion surged 11% in February after climbing 9.3% in January and rising 2% in December. It rallied 64% last year. The April contract is currently down $23.70 (-0.47%) an ounce to $5038.00 and the DG spot price is $5027.80.
The dollar pared gains after a three-day rally which helped pressure gold prices. The yellow metal is denominated in dollars, making it more expensive to holders of foreign currencies when the dollar is elevated.
While gold is a traditional hedge against inflation in times of geopolitical and economic uncertainty, it has taken a back seat to other assets, including the dollar, during the current conflict, particularly as oil traders are forced to put up more money to cover their trades.
The Fed is set to meet on monetary policy Wednesday, and policymakers will be looking at inflation and the labor market for cues. Currently, the majority of investors don’t expect the Fed to cut rates until the fourth quarter, the CME tool shows, the CME FedWatch Tool shows.
The central bank kept interest rates unchanged in January after three previous rate cuts. The Fed reduced interest rates for a third consecutive time in December to 3.50% to 3.75%. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts in 2024.
In addition to the Fed rate decision Wednesday, another inflation measure, the producer price index, will come out with February data.
Data Friday showed fourth-quarter GDP was revised down to 0.7% growth, while January personal spending increased. March preliminary consumer sentiment fell as the war raised concerns about high gasoline prices and other increasing costs.
The release of the consumer price index for February on Wednesday showed that inflation held steady last month but remained above the Fed’s 2% target before the war.
Front-month silver declined 3.5% last week to settle at $81.34 an ounce on Comex after the May contract retreated 4.4% Friday. It touched a record above $115 in January. Silver gained 19% last month after advancing 11% in January and climbing 24% in December. It rose 141% last year. The May contract is currently up $0.042 (+0.05%) an ounce to $81.385 and the DG spot price is $81.19.
Spot palladium decreased 4.8% last week to $1,588.00 an ounce and slid 3.1% Friday. Palladium gained 8.8% in February after advancing 2.4% in January and increasing 11% in December. Palladium gained 74% last year. Currently, the DG spot price is up $27.30 an ounce to $1607.00.
Spot platinum retreated 4% last week to $2,063.20 an ounce after losing 4.3% Friday. It advanced 15% last month after gaining 1.4% in January and surging 22% in December. Platinum increased 122% in 2025. The DG spot price is currently up $68.50 an ounce to $2129.60.
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