Gold little changed early Monday, and appears headed for its best month since March, as speculation grew that the Federal Reserve is nearing the end of its interest rate-increase cycle and the dollar weakened.
The U.S. personal consumption expenditures price index, the Federal Reserve’s favorite inflation measure, showed that inflation rose at the slowest pace in more than two years in June, signaling that the Fed’s interest rate increases totaling 5.25 percentage points since March 2022 are working. A pause or end to the interest rates hikes would be considered bullish for gold because the metal becomes less attractive to investors when rates go up.
Front-month gold futures fell 0.3% last week to settle at $1,999.90 an ounce on Comex, though the December contract gained 0.7% Friday. Bullion is up 3.7% so far this month after dropping 2.7% last month and retreating 0.9% in May. The metal gained 5.7% in the first half of the year after falling $2.40 in 2022. The December contract is currenlty up $2.9 (+0.15%) an ounce to $2002.80 and the DG spot price is $1965.20.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% Friday, according to Reuters.
The so-called “core” PCE index – which excludes food and energy costs – gained 0.2% in June from the prior month, according to data from the Commerce Department, in line with estimates. It rose 4.1% from a year ago, the lowest annual increase since September 2021. Including food and energy costs, the PCE gained 0.2% for the month and 3% year on year. The latter was the lowest figure since March 2021.
Investors are now awaiting Friday’s release of the U.S. monthly jobs report for July for indications on whether the rate hikes have had an impact on the labor market – and whether it will be resilient if more rate increases are necessary.
About 79.5% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in September at 5.25% to 5.50%. Just 20.5% expect it to raise rates another 25 basis points. Most investors tracked by the tool are betting that it will then hold at that rate at the three remaining meetings this year.
Chinese physical gold premiums rose to a four-month high last week, Reuters reported, while there was a slight recovery in purchases in India.
September silver futures dropped 1.5% last week to settle at $24.50 an ounce on Comex. The most-active contract increased 0.5% Friday. Silver is up 6.4% this month after dropping 2.4% in June and decreasing 6.5% in May. It retreated 4.2% in the first half of the year after rising 3% in 2022. The September contract is currently up $0.120 (+0.49%) an ounce to $24.615 and the DG spot price is $24.53.
Spot palladium decreased 3.7% last week to $1,264.50 an ounce after gaining 0.3% Friday. Palladium is up 1% this month after falling 9.5% in June and tumbling 9.3% in May. Palladium plummeted 31% in the first half of the year after losing 5.7% in 2022. Currently, the DG spot price is up $31.90 an ounce to $1286.50.
Spot platinum fell 3% last week to $942.00 an ounce after slipping 70 cents Friday. Platinum is up 3.4% this month after falling 9.3% in June and retreating 7.4% in May. Platinum dropped 15% in the first half of the year after surging 10% in 2022. The DG spot price is currently up $15.30 an ounce to $957.90.
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