Gold heads for fourth weekly gain despite losing ground early Friday as the dollar strengthened. The precious metal remained near the $2400 mark amid speculation that the Federal Reserve will begin interest rate cuts in September.
Bullion declined for a second day on profit-taking after the yellow metal touched a new record on Wednesday. The prospect of interest rate reductions are seen as bullish for gold, which becomes a more attractive alternate investment when rates go down.
August gold futures slipped 0.1% Thursday to settle at $2,456.40 an ounce on Comex, and the most-active contract gained 1.5% in the first four days of the week. Bullion fell 0.3% last month after gaining 1.9% in May and 2.9% in April. The metal rose 13% in 2023.
The European Central Bank left interest rates unchanged Thursday, but investors are betting that, like the Fed, the bank will begin rate cuts in September.
The CME FedWatch Tool shows 95.3% of the investors tracked are betting that the Fed will keep rates unchanged this month. But almost all expect the central bank to start cutting in September, with most anticipating a 25 basis point cut.
The Fed kept interest rates unchanged again in June. The Fed has kept interest rates steady at 5.25% to 5.50% for about a year after raising them by 5.25 percentage points since March 2022 to rein in inflation. Policymakers are signaling increased confidence that inflation is approaching the Fed’s 2% target.
The Fed closely watches both inflation and labor market data when determining monetary policy. The Fed’s favorite inflation measure, the personal consumption expenditures price index, comes out in a week with June data and will likely provide further direction.
U.S. weekly initial jobless claims came out Thursday and showed the biggest increase since early May in new applications for unemployment benefits, a signal that the labor market may be cooling – which make also pressure the Fed to cut rates.
Earlier this week, the Fed’s Beige Book economic report from its 12 regional banks showed that five of the banks are seeing flat or declining economic activity, three more than in the last reporting period, possibly because of high interest rates.
Investors were also closely watching the U.S. political situation, including former President Donald Trump’s acceptance speech Thursday night at the Republican National Convention and pressure from Democrats for incumbent President Joe Biden to exit the race.
September silver futures dropped 0.5% Thursday to settle at $30.22 an ounce on Comex, and the front-month contract decreased 3% in the first four days of the week. Silver fell 2.9% last month after surging 14% in May and rising 7% in April. It ticked up 0.2% in 2023.
Spot palladium declined 2.4% Thursday to $980.70 an ounce and slid 4.2% so far this week. Palladium rallied 8.1% last month after declining 5.1% in May and losing 5.9% in April. Palladium plummeted 38% last year.
Spot platinum decreased 2.2% Thursday to $980.70 an ounce and is down 2.5% so far this week. Platinum fell 3.7% last month after advancing 10% in May and 3.1% in April. Platinum dropped 6.8% in 2023.
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