Gold hovers near $2400 an ounce Monday as the dollar slipped on expectations of Fed interest rate cut in upcoming months and U.S. President Joe Biden’s announcement that he wouldn’t seek reelection.
The precious metal posted its fourth consecutive weekly rally last week and touched a new record high on increased speculation about the timing of the long-awaited Fed rate cut. Most investors now expect the reductions will begin in September. The prospect of interest rate cuts are seen as bullish for gold, which becomes a more attractive alternate investment when rates go down. The market is now waiting a key inflation report this week for further direction.
Separately, Biden dropped out of the presidential race after weeks of pressure from his own party following a lackluster debate performance that raised concerns about his age and fitness for office. The move upturned the upcoming U.S. election, as Democrats have just weeks to get behind a nominee to challenge former President Donald Trump. Biden endorsed Vice President Kamala Harris, who received a series of early endorsements from others in the party.
Front-month gold futures rose 1.1% last week to settle at $2,446.80 an ounce on Comex, though the most-active December contract fell 2.3% Friday. The front-month contract rolled to December from August last week. Bullion is up 4.6% so far this month after falling 0.3% in June and gaining 1.9% in May. The metal rose 13% in 2023. The August contract is currently down $4.00 (-0.17%) an ounce to $2395.10 and the DG spot price is $2392.90.
The CME FedWatch Tool shows 97.4% 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.
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 Friday. The Fed has a 2% target for inflation.
September silver futures dropped 6% last week to settle at $29.30 an ounce on Comex after the front-month contract decreased 3.1% Friday. Silver is down 0.9% so far this month after falling 2.9% in June and surging 14% in May. It ticked up 0.2% in 2023. The September contract is currently down $0.224 (-0.76%) an ounce to $29.075 and the DG spot price is $28.91
Spot palladium declined 7% last week to $913.00 an ounce after losing 2.9% Friday. Palladium is down 7.9% in July after rallying 8.1% last month and declining 5.1% in May. Palladium plummeted 38% last year. The current DG spot price is down $11.30 an ounce to $911.00.
Spot platinum decreased 3.8% last week to $967.60 an ounce after dropping 1.3% Friday. Platinum is down 3.6% in July after falling 3.7% in June and advancing 10% in May. Platinum dropped 6.8% in 2023. Currently, the DG spot price is down $21.90 an ounce to $947.00.
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