Gold firms on dollar, Geopolitics

Gold firms on dollar, Geopolitics

Gold firms on a softer dollar and growing concern over geopolitics from yesterday’s missile strike in Poland to early morning news of a projectile hitting a tanker off the coast of Oman.

Gold is a traditional hedge against geopolitical uncertainty, so any escalation of the conflict between Russia and Ukraine is bullish. 

Two people in Poland were killed by a missile Tuesday near the country’s eastern border with Ukraine. U.S. President Joe Biden convened an emergency meeting of the G-7 and NATO leaders Wednesday following the explosion. The Polish government is investigating whether the missile came from Russia. Meanwhile, the U.S. Navy’s Fifth Fleet said it was aware of an incident in the Gulf of Oman involving a commercial vessel. Gold rose as the news broke in early morning trading.

Front-month gold futures slipped 10 cents Tuesday to settle at $1,776.80 an ounce on Comex. The December contract gained 0.4% in the first two days of the week. Bullion fell 1.9% in October, its seventh straight month of declines. The metal is down 2.8% this year. Currently, the December contract is up $5.2 (+0.29%) an ounce to $1782.00 and the DG spot price is $1779.70.

Gold continued to be buoyed by economic news and speculation about whether the Federal Reserve will slow the pace of a series of interest-rate hikes to curb 40-year highs in inflation. Prices for the yellow metal surged last week after the October consumer price index report showed inflation growth was slowing

The Fed has increased interest rates by 375 basis points this calendar year. There have been 75-basis-point increases each in June, July, September, and November, and the federal funds rate is now at 3.75% to 4%. High rates are typically bearish for gold because they make the yellow metal less attractive than other assets. 

The U.S. producer price index increased less than forecast in October, data released Tuesday showed, a further indication that inflation is easing as the Fed has tightened monetary policy.

Investors are betting there’s an 80.6% chance Fed policymakers will raise interest rates by 50 basis points in December, compared with 56.8% early last week. About 19.4% of investors tracked by the CME FedWatch Tool are projecting a 75-basis-point hike, compared with 43.2% before the CPI report. 

Front-month silver futures dropped 2.7% Tuesday to settle at $21.52 an ounce on Comex. The December contract retreated 0.7% in the first two days of the week. Silver advanced 0.4% in October, its second consecutive monthly increase. It’s down 7.9% this year. The December contract is currently up $0.202 (+0.94%) an ounce to $21.720 and the DG spot price is $21.74.

Spot palladium gained 1.8% Tuesday to $2,102.50 an ounce and is up 2.5% this week. Palladium declined 15% last month. It’s up 9.8% in 2022. Currently, the DG spot price is up $4.20 an ounce to $2107.50.

Spot platinum decreased 1.8% Tuesday to $1,015.80 an ounce. It’s down 1.6% so far this week. Platinum gained 7.3% in October. It’s up 4.4% this year. The current DG spot price is slightly up, $1.40 an ounce to $1020.80

Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.