Gold little changed ahead of economic reports

Gold little changed ahead of economic reports

Gold little changed early Monday ahead of economic reports after a key inflation measure came in as expected for April.

Two important economic measures are due out this week and will be closely watched by investors – U.S. manufacturing data from the Institute of Supply Management, due out Monday at 9 am CDT, Wednesday’s ADP employment report, and the critical U.S. monthly jobs report for May, due out Friday. These reports will likely further solidify expectations about the Federal Reserve’s plans for monetary policy. 

The yellow metal capped a fourth consecutive monthly rally in May, setting new records last month amid geopolitical uncertainty, some weakness in the dollar and anticipation of interest rate cuts. 

August gold futures fell 0.5% last week to settle at $2,345.80 an ounce on Comex, and the most-active contract lost 0.5% Friday. Bullion gained 1.9% last month after rallying 2.9% in April and rising 8.9% in March – the biggest monthly gain in more than three years. May’s was the fourth consecutive monthly rally. The metal rose 13% in 2023. The August contract is currently up $8.60 (+0.37%) an ounce to $2354.40 and the DG spot price is $2335.60.

The April personal consumption expenditures price index, the Fed’s favorite inflation measure, showed that “core” PCE, excluding volatile food and energy costs, increased 2% in April from a month earlier and 2.8% from a year earlier. Including food and energy costs, the report released Friday showed that “headline” PCE rose 0.3% and 2.7%, respectively. 

The Fed has a 2% target for inflation. The central bank has raised interest rates by 5.25 percentage points since March 2022 to rein in inflation but has held rates steady for almost a year. The central bank was widely expected to begin a series of rate cuts in the first part of this year, but the timeline has been pushed back by persistently high inflation. High interest rates are typically bearish for gold, making them a less attractive alternate investment than other assets. 

In a separate release Friday, personal income rose 0.3% in April, matching economists’ estimates, while personal spending rose just 0.2%. 

The Fed has said that it closely watches both inflation and labor market data when setting monetary policy. So investors are anticipating Friday’s monthly U.S. jobs report from the Labor Department for further direction, along with the private payrolls report from ADP on Wednesday and U.S. weekly initial jobless claims from the Labor Department on Thursday. 

99.9% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged next week while .1 believe the rates will go down 25 basis points. More than 85% of investors also expect the Fed to hold rates at current levels in July and just under half see rates staying unchanged in September. Many investors don’t expect a rate cut until November. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting. 

July silver futures fell 0.2% last week to settle at $30.44 an ounce on Comex after the front-month contract dropped 3.5% Friday. Silver surged 14% last month after rising 7% in April and gaining 8.9% in March. It ticked up 0.2% in 2023. The July contract is currently up $0.205 (+0.67%) an ounce to $30.645 and the DG spot price is $30.61.

Spot palladium lost 6% last week to $917.50 an ounce after decreasing 4.7% Friday. Palladium declined 5.1% in May after losing 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. Currently the DG spot price is up $7.10 an ounce to $920.00.

Spot platinum increased 0.6% last week to $1,042.00 an ounce after gaining 0.6% Friday. Platinum advanced 10% in May after gaining 3.1% in April and rising 3.3% in March. Platinum dropped 6.8% in 2023. The DG spot price is currently down $7.60 an ounce to $1033.50.

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