Gold was little changed early Friday as it heads for its best year since 2020, buoyed by a dollar that is weakened amid speculation that the Federal Reserve will begin interest rate cuts early next year as inflation growth has slowed.
The yellow metal touched the highest level since a Dec. 4 record peak on Thursday, before easing off. London’s gold price benchmark also hit an all-time high of $2,069.40 per troy ounce on Wednesday, topping the previous record of $2,067.15 per troy ounce set in August 2020.
Front-month gold futures fell 0.5% Thursday to settle at $2,083.50 an ounce on Comex. The February contract advanced 0.7% so far this week. Bullion is up 1.3% this month after rising 3.2% in November and gaining 6.9% in October. The metal is up 14% in 2023. The February contract is currently down $12.60 (-0.60%) an ounce to $2070.90 and the DG spot price is $2062.70.
Volumes are low because of the holiday week, making trading more volatile. Markets were closed Monday for Christmas Day and will be closed this coming Monday for New Year’s Day.
The yellow metal has gotten a boost from the U.S. dollar, which was headed for its worst year since 2020. Lower interest rates are typically bullish for gold, making it a more attractive asset for investors. At the same time, the prospect of lower rates is bearish for the dollar and Treasury yields. Declines in those assets is supportive for gold.
The CME FedWatch Tool shows that 85.5% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged at 5.25% to 5.50% in January, while 14.5% are expecting a 25 basis point cut. But that changes in March, with the central bank widely expected to cut, with another expected in May. The Fed has raised interest rate cuts by 5.25 percentage points since March 2022 to curb inflation.
The Fed has said it closely watches inflation and labor market data when determining monetary policy.
U.S. weekly initial jobless claims data for last week, which came out Thursday, supported speculation about a rate cut because it indicated that the labor market is softening. Applications for new unemployment claims rose by 12,000 last week to 218,000, according to the Labor Department. That’s more than the increase to 210,000 forecast by economists.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, excluding volatile food and energy prices, increased 1.9% on a six-month basis in November data released last week, essentially putting inflation at the Fed’s target of 2% inflation. It was still well above the target, at 3.2%, on an annual basis.
Front-month silver futures slipped 0.7% Tuesday to settle at $24.40 an ounce on Comex. The March contract increased 1% last week. Silver is down 4.9% this month after advancing 12% in November and increasing 2.2% in October. It’s up 1.5% in 2023. The March contract is currently down $0.567 (-2.33%) an ounce to $23.805 and the DG spot price is $23.65
Spot palladium fell 2.2% Tuesday to $1,197.50 an ounce after slipping 0.5% last week. Palladium is up 16% in December after losing 9.5% in November and dropping 10% in October. Palladium has plummeted 34% so far this year. The current DG spot price is down $27.20 an ounce to $1123.00.
Spot platinum gained 0.4% Tuesday to $986.40 an ounce after rising 3.9% last week. Platinum is up 5.4% in December after falling 0.7% in November and gaining 3.5% in October. Platinum is down 7.8% in 2023. Currently, the DG spot price is down $6.80 an ounc e to $1005.40.
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