Gold Inches Up ahead of Fed minutes

Gold Inches Up ahead of Fed minutes

Gold inches up early Wednesday ahead of the release of the Fed minutes from the central bank’s last meeting, which will be closely watched for indicators on the Fed’s next moves.

The Fed’s favorite inflation measure, the personal consumption expenditures price index, is due out Friday with January data and is also likely to influence market sentiment.

Recent economic reports showing rising inflation and a robust economy have lent support to speculation that the Fed will raise interest rates beyond 5% over the coming months. Interest rate increases are considered bearish for gold because they make the metal less attractive as an alternate investment. 

Front-month gold futures fell 0.4% Tuesday to settle at $1,842 an ounce on Comex after the April contract dropped 1.3% last week. Comex was closed along with other U.S. financial markets on Monday for the Presidents Day holiday. Bullion increased 6.5% in January after gaining 3.8% in December and gaining 7.3% in November. It was the longest consecutive monthly rally since July 2020. The metal fell $2.40 in 2022. The April contract is currently up $2.2 (+0.12%) an ounce to $1844.70 and the DG spot price is $1837.90.

U.S. business activity rose to the highest level in eight months in February, according to the S&P Global flash composite purchasing managers index, released Tuesday. The report lent weight to the theory that the Fed can continue its interest rate increases without triggering an economic downturn.

The Fed raised rates by 25 basis points on Feb. 1 to 4.50% to 4.75%. The move followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September, and November. The minutes of the Jan. 31-Feb. 1 meeting are set for release Wednesday, and investors will be parsing them closely for indications on future moves.

While most investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by another 25 basis points in March, more are banking on a larger hike since last week’s economic reports. The tool shows 79% of investors anticipating a 25-basis-point hike, with the remaining 21% expecting the Fed to raise rates by 50 basis points. A week ago, 87.8% of those tracked were expecting a 25 basis point increase. 

The consumer price index increased by 0.5% in January, the most in three months, and was up 6.4% from a year earlier, data released last week showed. Wholesale costs rose more than expected in January, with the producer price index topping analysts’ biggest growth estimate. 

Silver May futures rose 0.8% Tuesday to settle at $22.03 an ounce on Comex. The front-month contract, which rolled to May from March, lost 1% last week. Silver fell 0.9% in January after rising 10% in December and increasing 14% in November. It advanced 3% in 2022. The May contract is currently down $0.102 (-0.46%) an ounce to $21.925 and the DG spot price is $21.83.

Spot palladium rose 2.1% Tuesday to $1,557.00 an ounce after sliding 2.2% last week. Palladium dropped 7.5% in January after retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is down $19.70 an ounce to $1536.00.

Spot platinum increased 2.7% Tuesday to $952.20 an ounce after decreasing 3% last week. Platinum retreated 4.3% in January after increasing 3.4% in December and rising 11% in November. It surged 10% in 2022. The DG spot price is currently up $10.70 an ounce to $966.30

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