Gold holding steady ahead of Fed

Gold holding steady ahead of Fed

Gold holding steady little changed early Wednesday ahead of the Fed monetary policy decision.

Investors will be closely parsing the language of the Fed statement this afternoon for signals on whether the central bank is coming to the end of its cycle of interest rate increases. The Fed has raised rates by 5 percentage points since March 2022 in an effort to rein in inflation. It’s widely expected to boost rates by another 25 basis points today. The Fed held rates unchanged last month for the first time after 10 consecutive increases.

Front-month gold futures ticked up $1.80 Tuesday to settle at $2,002.80 an ounce on Comex, though the December contract slipped 0.1% in the first two days of the week. Bullion dropped 2.7% last month after retreating 0.9% in May and increasing 0.6% in April. The metal gained 5.7% in the first half of the year after falling $2.40 in 2022. The December contract is currently up $4.00 (+0.20%) an ounce to $2006.80 and the DG spot price is $1966.30.

About 96.5% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise its federal funds rate by 25 basis points to 5.25% to 5.50%, while 3.5 think a 50 basis point hike to 5.50% to 5.75% is in the offing. 0% expect rates to stay unchanged. 

Most investors tracked by the tool are betting that it will then hold at that rate for the rest of the year. There are three more policy meetings scheduled for 2023, in September, November and December. A pause in interest rates hikes would be considered bullish for gold because the metal becomes less attractive to investors when rates go up. 

The Fed increased rates by 25 basis points three times this year following hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022 and smaller increases in March and May of last year. 

But high rates haven’t hurt U.S. consumer confidence, which jumped to the highest level since July 2021 this month, data from the Conference Board showed Tuesday. The monthly consumer confidence index jumped to 117 in July from 110.1 in June. It was the third monthly increase. 

Other key economic reports due this week include U.S. second-quarter GDP data on Thursday and the personal consumption expenditures price index, the Fed’s favorite inflation measure, on Friday. 

Investors will also be watching the European Central Bank and the Bank of Japan, which will issue their own policy decisions Thursday. The ECB is expected to raise rates again, though investors will be looking for signals on future decisions. The BOJ is forecast to hold its rates unchanged.  

September silver futures rose 1% Tuesday to settle at $24.82 an ounce on Comex. The most-active contract lost 0.1% in the first two days of the week. Silver dropped 2.4% in June after decreasing 6.5% in May and gaining 4.4% in April. It retreated 4.2% in the first half of the year after rising 3% in 2022. The September contract is currently down $0.069 (-0.28%) an ounce to $24.755 and the DG spot price is $24.65.

Spot palladium increased 0.9% Tuesday to $1,310.50 an ounce but is down 0.2% so far this week. Palladium fell 9.5% in June after tumbling 9.3% in May and rising 2% in April. Palladium plummeted 31% in the first half of the year after losing 5.7% in 2022. Currently, the DG spot price is down $36.20 an ounce to $1270.00.

Spot platinum gained 0.6% Tuesday to $974.70 an ounce and is up 0.4% this week. Platinum fell 9.3% in June after retreating 7.4% in May and adding 8.5% in April. Platinum dropped 15% in the first half of the year after surging 10% in 2022. The DG spot price is currently up $10.80 an ounce to $964.30.

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