Gold eyes second weekly gain

Gold eyes second weekly gain

Gold eyes second weekly gain in Friday morning trading after hitting a one-month high earlier in the market day as the latest U.S. data pointed to signs of slowing inflation, bolstering investor expectations of an interest rate cut by the Federal Reserve in June.

The yellow metal rose Thursday and the dollar slipped following the release of the latest U.S. inflation data, the personal consumption expenditures price index (PCE), which showed that the cost of goods rose in line with expectations in January. Excluding volatile food and energy costs, so-called core-PCE increased 0.4% month on month in January and 2.8% from a year earlier, in line with economists’ expectations. Top-line PCE, including food and energy costs, increased 0.3% for the month and 2.4% on a 12-month basis, also in line with the consensus. 

A weaker dollar is bullish for gold because it makes the yellow metal more affordable for holders of other currencies. But high interest rates are considered bearish because they make gold a less attractive asset for investors. The key ISM manufacturing report is due out Friday with February data and may provide further direction.

Front-month gold futures rose 0.6% Thursday to settle at $2,054.70 an ounce on Comex, and the most-active April contract gained 0.3% 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 up $7.10 (+0.35%) an ounce to $2061.80 and the DG spot price is $2053.50.

U.S. GDP has topped 2% for six consecutive quarters, according to data out Wednesday, a signal that the economy is tolerating the high interest rates. 

Atlanta Fed President Raphael Bostic reiterated Thursday that the central bank can probably begin cutting interest rates this summer, as inflation nears the Fed’s 2% target. 

“The slope of the line is still going down,” he said, according to Bloomberg. “I’m of the view that it will probably be appropriate if things go the way that I expect to see us start to reduce rates in the summertime.” 

Cleveland Fed President Loretta Mester said Thursday that she still anticipates three rate cuts in 2024, but “there is a little more work for the Fed to do here in terms of making sure that we can get all the way back to that 2% goal,” she told Yahoo News in an interview. 

Bostic and San Francisco Fed President Mary Daly are scheduled to speak Friday. 

About 97% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged next month, while 3% expect a 25 basis point cut. Most investors tracked by the tool now also anticipate the Fed will hold rates steady at the following policy meeting in May. Most are now looking to June for a rate 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% earlier this month. High interest rates are typically considered bearish for gold. 

Front-month silver futures, which rolled to May from March last week, rose 1.1% Thursday to settle at $22.89 an ounce on Comex, though the May contract is down 1.3% so far this 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 $0.005 (-0.02%) an ounce to $22.880 and the DG spot price is $22.71.

Spot palladium increased 1.8% Thursday to $954.00 an ounce but is down 4.6% 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 $2.80 an ounce to $950.00.

Spot platinum slipped 70 cents Thursday to $885.50 an ounce, though it’s down 2.7% 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 $8.40 an ounce to $878.60.

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