Gold falls on Powell’s hawkish comments

Gold falls on Powell's hawkish comments

Gold falls early Friday on Federal Reserve Chairman Jerome Powell’s hawkish comments. The yellow metal is heading for a second consecutive weekly decline, after the Fed chair increased speculation that the central bank may not be done yet with its series of interest rate hikes. Palladium tumbled to its lowest level since 2018.

“The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time; we are not confident that we have achieved such a stance,” he said Thursday in prepared remarks for an International Monetary Fund event in Washington. The Fed’s favorite inflation measure, the core personal consumption expenditures price index, has fallen to an annual rate of 3.7% from 5.3% in February 2022. 

The Fed has boosted interest rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level. The Fed kept interest rates unchanged at 5.25% to 5.50% last week. Interest rate hikes are typically considered bearish for gold because they make the precious metal less attractive than other assets. 

Front-month gold futures rose 0.6% Thursday to settle at $1,969.80 an ounce on Comex, though the December contract is down 1.5% so far this week. Bullion gained 6.9% in October after falling 5.1% in September and dropping 2.2% in August. The metal is up 7.9% in 2023. The December contract is currently down $18.80 (-0.95%) an ounce to $1951.00 and the DG spot price is $1947.30.

Inflation is “well above” where the Fed would like to see it, Powell said, adding that getting it sustainably below 2% “has a long way to go.” 

About 90.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in December, while 9.6% expect it to raise rates by 25 basis points. The central bank has raised interest rates only once since May. 

Gold has consolidated below the $2,000-an-ounce resistance level since last week after surging about 10% over the previous month because of haven demand triggered by the conflict in the Middle East. 

Front-month silver futures increased 0.8% Thursday to settle at $22.91 an ounce on Comex, while the December contract lost 1.6% in the first four days of the week. Silver increased 2.2% last month after decreasing 9.5% in September and slipping 0.6% in August. It’s down 4.7% in 2023. The December contract is currently down $0.500 (-2.18%) an ounce to $22.405 and the DG spot price is $22.40.

Spot palladium fell 5.4% Thursday to $1,013.00 an ounce, and it lost 11% so far this week. Palladium dropped 10% in October after rising 3% in September and sliding 5.3% in August. Palladium has plummeted 44% so far this year. Currently, the DG spot price is down $41.10 an ounce to $978.00.

Spot platinum declined 0.5% Thursday to $869.60 an ounce and decreased 7.7% so far this week. Platinum gained 3.5% in October after declining 6.6% last month and advancing 1.7% in August. Platinum is down 19% in 2023. The DG spot price is currently down $10.10 an ounce to $857.70.

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