Gold little changed near record high

Gold little changed near record high

Gold little changed above $2,500 an ounce near Tuesday’s record high, bolstered by geopolitical tensions and speculation about an upcoming Federal Reserve interest rate cut.

The yellow metal is up 23% so far this year and tested a new record this week. Investors are now awaiting further direction on expected interest rate cuts from the minutes of the Federal Reserve’s July policy meeting, due out Wednesday afternoon. Gold slipped to the lowest level this year, which also bolstered the precious metal as an alternate investment. 

Front-month gold futures rose 0.4% Tuesday to settle at $2,550.60 an ounce on Comex, and the most-active December contract rallied 0.5% in the first two days of the week. Bullion increased 5.7% in July, its biggest monthly gain since March. Gold fell 0.3% in June and gained 1.9% in May. The metal rose 13% in 2023. The December contract is currently down $2.70 (-0.11%) an ounce to $2547.90 and the DG spot price is $2510.00.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% Tuesday from seven-month highs, Reuters reported. 

U.S. Secretary of State Antony Blinken said Tuesday that Israel had agreed to a U.S.-brokered agreement for the release of hostages held by Hamas and a ceasefire in Gaza, but officials on both sides of the conflict have downplayed that idea. Negotiators were attempting to stop a regional escalation of the conflict. Gold frequently sees haven demand at times of geopolitical unrest, so a breakdown in talks would be considered bullish for gold. 

In addition to the Fed minutes Wednesday, investors are also awaiting Fed Chairman Jerome Powell’s scheduled remarks Friday at the central bank’s annual conference in Jackson Hole, Wyoming. 

The Federal Reserve is widely expected to begin long-awaited interest rate reductions in September. The Fed has kept interest rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation. A cut would be considered bullish for gold, which becomes a more attractive alternate investment when rates go down. 

Atlanta Fed President Raphael Bostic said Tuesday that “a little more data” is needed to support an interest rate cut, though he’s confident that the central bank can get to its 2% inflation target. The Fed closely watches both inflation and labor market data when determining monetary policy, particularly as concerns have mounted over a possible recession.

Last week, the U.S. consumer price index for July came in at the lowest level since March 2021, while the producer price index showed inflation rose less than expected last month. The Fed’s favorite inflation measure, the personal consumption expenditures price index, comes out Aug. 30 with July data. 

Investors tracked by the CME FedWatch Tool unanimously expect the Fed to begin interest rate cuts at the central bank’s next policy meeting in September. About 67.5% expect a 25 basis point cut, while the rest anticipate a 50 basis point cut. 

Front-month silver futures rose 0.7% Tuesday to settle at $29.95 an ounce on Comex, and the December contract increased 2.4% in the first two days of the week. Silver dropped 2.1% in July after falling 2.9% in June and surging 14% in May. It ticked up 0.2% in 2023. The December contract is currently up $0.097 (+0.32%) an ounce to $30.050 and the DG spot price is $29.57.

Spot palladium slipped $1 Tuesday to $938.00 an ounce and is down 2.1% so far this week. Palladium decreased 4.3% in July after gaining 8.1% in June and declining 5.1% in May. Palladium plummeted 38% last year. The DG spot price is currently up $42.00 an ounce to $981.00.

Spot platinum fell 0.6% Tuesday to $956.50 an ounce and declined 0.4% so far this week. Platinum lost 2.1% in July after falling 3.7% in June and advancing 10% in May. Platinum dropped 6.8% in 2023. The current DG spot price is up $19.50 an ounce to $975.10.

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