Gold fell after Fed Chairman Jerome Powell said that the central bank is in no rush to cut interest rates during his congressional testimony Tuesday. Even with the slip, the price of gold is still having a banner year, jumping 10% since the start of 2025 after growing 27% in 2024.
The yellow metal slipped $15 an ounce on this morning’s inflation data, but then rebounded as bulls stepped in to buy the dip bringing gold back to the $2900 an ounce mark. In January, the consumer price index accelerated a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 3%, both higher than expected. Markets now largely expect the Fed to hold interest rates for longer than expected, pushing the next rate cut to September.
Gold remained near record highs around $2,900 an ounce, as investors seek a haven from geopolitical and economic risk from U.S. President Donald Trump’s policies on trade, immigration and the Middle East. Trump’s 25% tariffs on steel and aluminum imports into the country went into effect Monday.
April gold futures slipped $1.80 Tuesday to $2,932.60 an ounce on Comex, though the most-active contract advanced 1.6% in the first two days of the week. Bullion increased 7.3% last month after dropping 1.5% in December and losing 2.5% in November. The metal gained 27% in 2024, its biggest annual gain since 2010. The April contract is currently down $14.5 (-0.49%) an ounce to $2918.10 and the DG spot price is $2889.90.
Powell’s remarks on Tuesday sent yields on 10-year Treasuries climbing, making gold a less attractive alternate investment. High interest rates are also considered bearish for gold, while low rates and rate cuts are bullish.
“We know that reducing policy restraint too fast or too much could hinder progress on inflation,” Powell told the Senate Banking Committee in semiannual testimony. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”
Fed policymakers, who had been widely expected to continue a series of interest rate cuts that began last year into 2025, unanimously agreed last month to keep their benchmark interest rate at 4.25% to 4.50%. It was the central bank’s first policy meeting since July without a rate cut.
The Fed cut rates three times last year, reducing its benchmark interest rate in September, November and December. Previously, the Fed had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to combat inflation.
Most investors aren’t pricing in a Fed rate reduction until June at the earliest, according to investors tracked by the CME FedWatch Tool. About 97% expect rates to remain unchanged in March, compared with 3% anticipating a 25 basis point cut. The first month that has greatest percentage of investors expecting a rate cut is September.
The key U.S. monthly jobs report on Friday showed that the labor market remains resilient, with the unemployment rate unexpected falling to 4% in January from 4.1% the previous month. The figure its at its lowest level since May 2024. However, the U.S. economy created 143,000 new jobs last month, less than the 170,000 forecast by economists and lower than December’s 307,000.
Front-month silver futures fell 0.5% Tuesday to settle at $32.32 an ounce on Comex, and the most-active March contract decreased 0.4% so far this week. Silver added 10% last month after dropping 6% in December and falling 5.1% in November. It gained 21% in 2024. The March contract is currently up $0.183 (+0.57%) an ounce to $32.505 and the DG spot price is $32.03.
Spot palladium lost 0.9% Tuesday to $993.00 an ounce but is up 0.7% so far this week. Palladium advanced 11% last month after falling 6.7% in December and sliding 12% in November. Palladium dropped 17% last year. Currently, the DG spot price is down $9.30 an ounce to $984.00.
Spot platinum edged up 0.1% Tuesday to $997.90 an ounce and is up 1% in the first two days of the week. Platinum gained 8.4% in January after losing 4.6% in December and declining 4.2% in November. Platinum slid 8.4% in 2024. The DG spot price is currently up $6.20 an ounce to $1000.90.
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