Gold heads for weekly gain on post-Fed momentum

Gold heads for weekly gain on post-Fed momentum

Gold heads for weekly gain, after rallying for a third day on post-Fed comment momentum. The yellow metal lost some altitude this morning on profit-taking and strengthening dollar, but it remains strong following the Federal Reserve’s monetary policy statements on Wednesday.

The central bank kept interest rates unchanged at 5.25% to 5.50% this week but signaled an upcoming end to its monetary policy tightening cycle. 

“The question of when will it become appropriate to begin dialing back the amount of policy restraint in place – that begins to come into view and is clearly a topic of discussion out in the world and also a discussion for us at our meeting today,” Fed Chairman Jerome Powell in remarks following the announcement. 

Higher interest rates are typically bearish for gold so an end to interest rates would be bullish for the yellow metal.

Front-month gold futures gained 2.4% Thursday to settle at $2,044.90 an ounce on Comex, and the February contract is up 1.5% in the first four days of this week. Bullion rose 3.2% last month after gaining 6.9% in October and falling 5.1% in September. The metal is up 12% in 2023. The February contract is currently up $3.40 (+0.17%) an ounce to $2048.30 and the DG spot price is $2034.50.

The Fed’s move came after the November inflation report showed slowing and the November  jobs report beat estimates, along with consumer sentiment for December. Fed officials have said they closely watch both inflation and labor market reports when crafting monetary policy decisions. 

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 in January, while 14.5% are expecting a 25 basis point cut. But the picture changes in March, with the central bank widely expected to cut, with another expected in May. The central bank has boosted rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level. 

Goldman Sachs is now forecasting a series of interest rate cuts starting in March, while Barclays is calling for three cuts in 2024. JPMorgan Chase is forecasting easing will start in June, rather than the previous estimate of July.

The European Central Bank also kept interest rates unchanged Thursday and trimmed its inflation forecast. The Bank of England also kept its monetary policy unchanged but said rates would stay high for an “extended period.”

Front-month silver futures increased 6.4% Thursday to settle at $24.39 an ounce on Comex, and the March contract is up 4.8% so far this week. Silver advanced 12% in November after increasing 2.2% in October and decreasing 9.5% in September. It’s up 1.4% in 2023. The March contract is currently down $0.061 (-0.25%) an ounce to $24.325 and the DG spot price is $24.03.

Spot palladium gained 15% Thursday to $1,128.50 an ounce and is up 17% so far this week. Palladium lost 9.5% last month after dropping 10% in October and rising 3% in September. Palladium has plummeted 38% so far this year. Currently, the DG spot price is up $21.10 an ounce to $1150.50.

Spot platinum advanced 4.5% Thursday to $966.80 an ounce, and it gained 4.3% in the first four days of the week. Platinum fell 0.7% in November after gaining 3.5% in October and declining 6.6% in September. Platinum is down 9.6% in 2023. The DG spot price is currently down $20.40 an ounce to $948.00.

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