Gold falls to trade near a seven-month low early Monday amid a strong dollar and expectations that interest rates will remain high for some time.
Investors await further direction from the monthly U.S. jobs report for September, due out Friday. Last week, the Fed’s favorite inflation measure, the personal consumption expenditures price index – which the central bank watches closely when determining monetary policy – showed inflation moderated in August.
Front-month gold futures dropped 4.1% last week to settle at $1,866.10 an ounce on Comex after the December contract retreated 0.7% Friday. Bullion fell 5.1% in September after dropping 2.2% in August and rising 4.1% in July. The metal is up 2.2% in 2023. The December contract is currently down $13.00 (-0.70%) an ounce to $1853.10 and the DG spot price is $1835.90.
Gold had its worst month since February in September amid the prospect that interest rates will be higher for longer. Higher interest rates are considered bearish for gold, making the precious metal less attractive to investors.
The PCE index, released by the Commerce Department on Friday, rose less than expected in August. So-called core PCE – the index excluding food and energy – increased 0.1%, less than the 0.2% economists had expected for August. It was the smallest monthly gain since November 2020. The annual figure was 3.9%, in line with expectations. The headline PCE number – including food and energy – increased 0.4% in August and 3.5% from a year earlier.
About 69.1% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November. Just 30.9% expect it to raise rates another 25 basis points. Before the PCE report, 81.7% were betting on a hold and 18.5% anticipating a 25 basis point increase.
There is also a meeting scheduled for December at which most investors also predict the Fed will hold, though also by a smaller margin.
The Fed has raised rates by 5.25 percentage points since March 2022 to curb inflation. The central bank held its benchmark interest rate at 5.25% to 5.50% in September. An end to Fed rate hikes – or a pause – is considered bullish for gold.
Front-month silver futures lost 5.9% last week to settle at $22.45 an ounce on Comex after the December contract retreated 1.3% Friday. Silver decreased 9.5% last month after slipping 0.6% in August and gaining 8.5% in July. It’s down 6.6% in 2023. The December contract is currently down $0.755 (-3.36%) an ounce to $21.695 and the DG spot price is $21.50.
Spot palladium slipped 0.4% last week to $1,265.50 an ounce after losing 1.9% Friday. Palladium rose 3% last month after sliding 5.3% in August and rising 3.6% in July. Palladium has plummeted 30% so far this year. Currently, the DG spot price is down $38.00 an ounce to $1228.00.
Spot platinum dropped 2.7% last week to $910.90 an ounce after falling 0.5% Friday. Platinum declined 6.6% last 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 $7.20 an ounce to $906.20.
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