Gold extends its record-setting gains early Wednesday amid anticipation of more Federal Reserve interest rate cuts and the worsening conflicts in the Middle East.
The yellow metal climbed last week after the Fed cut rates for the first time since the pandemic, dropping them by 50 basis points to 4.75% to 5.00%. Interest rate cuts are typically considered bullish for gold, which become more attractive alternate investments when rates go down. The precious metal is also a traditional hedge against uncertainty, both geopolitical and economic.
Investors will be awaiting additional direction from the Fed’s favorite inflation indicator, which is due out Friday, as well as comments from Fed officials including Chairman Jerome Powell.
Thousands of people have fled southern Lebanon since Monday as Israeli airstrikes killed hundreds. Hezbollah hit back on Israel over the weekend with a barrage of rockets after an attack that caused thousands of pagers and walkie-talkies in Lebanon. Israel hasn’t claimed responsibility for the pager attack, but most experts say it was responsible. The escalation in Lebanon comes on top of the ongoing Israeli action in Gaza which followed Oct. 7 Hamas attacks on Israel.
Front-month gold futures rose 0.9% Tuesday to settle at $2,677.00 an ounce on Comex. The most-active December contract added 1.2% in the first two days of the week. Bullion is up 5.9% this month after advancing 2.2% in August and increasing 5.7% in July, its biggest monthly gain since March. The metal rose 13% in 2023. The December contract is currently up $9.50 (+0.35%) an ounce to $2686.50 and the DG spot price is $2666.30.
Major banks expect gold to continue to rally to new records into 2025 on a surge in inflows from exchange-traded funds and interest rate cuts from central banks including the Fed, Reuters reported, citing notes from JP Morgan Chase, UBS and others.
U.S. consumer confidence fell the most in three years in September, according to data out Tuesday from the Conference Board, with respondents’ concerns mostly focused on jobs and inflation.
The Fed has said it closely looks at both inflation and labor market data when crafting monetary policy. The personal consumption expenditures price index, the Fed’s favorite inflation measure, is due out Friday with August data and will provide the latest measure on whether inflation is continuing to slow. Consumer sentiment for August is also due out Friday.
Fed Governor Michelle Bowman, the lone dissenting vote to the Fed rate cut last week, said Tuesday that she thought the central bank should have taken a more measured approach and she’s worried about resurging inflation.
Last week’s rate cut came after the Fed kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation. All investors tracked by the CME FedWatch Tool agree that the Fed will likely cut rates again in November, though 60.5% expect another 50 basis point reduction, while the remainder anticipate a 25 basis point one. Most expect rates to drop to 4.00% to 4.25% or lower by the end of 2024.
Powell is scheduled to speak Thursday, along with a slew of other Fed officials. U.S. weekly initial jobless claims also come out Thursday.
Front-month silver futures increased 4.3% Tuesday to $32.43 an ounce on Comex. The December contract advanced 2.9% in the first two days of the week. Silver is up 11% this month after gaining 0.7% in August and dropping 2.1% in July. It ticked up 0.2% in 2023. The December contract is currently down $0.215 (-0.66%) an ounce to $32.215 and the DG spot price is $32.01.
Spot palladium rose 1.5% Tuesday to $1,071.50 an ounce, though it fell 1.5% in the first two days of the week. Palladium is up 9.5% in September after increasing 3.2% in August and decreasing 4.3% in July. Palladium plummeted 38% last year. Currently, the DG spot price is down $14.10 an ounce to $1055.50.
Spot platinum rallied 2.6% Tuesday to $991.60 an ounce and is up 0.8% so far this week. Platinum is up 6.5% this month after sliding 5.2% in August and losing 2.1% in July. Platinum dropped 6.8% in 2023. The DG spot price is currently up $5.00 an ounce to $996.60.
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