Gold Loses Ground Ahead of Fed

Gold Slips from three-week high on firmer dollar

Gold loses ground Monday ahead of this week’s Fed Reserve monetary policy meeting and rate announcement while the dollar and bond yields gain strength.

Investors will be looking for indications on the pace and duration of the central bank’s additional interest rate increases. Rate hikes are typically bearish for gold, but the inflation underlying the moves is historically bullish.

The Fed’s favorite inflation measure, the personal consumption expenditures price index, increased roughly in line with analysts’ expectations in September, according to data released Friday. Core PCI rose 0.5% last month from August and 5.1% over the previous 12 months. Including food and energy prices, PCE inflation rose 0.3% for the month and 6.2% on a yearly basis, the same amount it increased in August. 

Front-month gold futures fell 0.7% last week to settle at $1,644.80 an ounce on Comex after the December contract decreased 1.3% Friday. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 10% this year. The current December contract is down $6.70 (-0.41%) an ounce to $1638.10 and the DG spot price is $1640.00.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.28% Friday to 922.59 metric tons, Reuters reported. 

Investors are now betting there’s an 82.3% chance of a 75-basis-point rate increase at Fed policymakers’ next meeting on Nov. 2, with the remaining 17.7% projecting a 50-basis-point hike, according to the CME FedWatch Tool. Just a week ago, 95% of investors anticipated a 75-basis-point increase, with 5% predicting a 50-basis-point hike. 

The Fed has raised rates by 300 basis points so far this year to 3% to 3.25%, following increases of 75 basis points each in June, July, and September. 

In addition to the Fed meeting, investors will be closely watching for the key U.S. manufacturing data for October on Tuesday and the monthly U.S. jobs report for the month on Friday for signals on the state of the economy. 

Front-month silver futures gained 0.4% last week to settle at $19.15 an ounce on Comex, though the December contract declined 1.8% Friday. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 18% this year. The December contract is down $0.192 (-1.00%) an ounce to $18.955 and ht DG spot price is $19.14.

Spot palladium tumbled 5.7% last week to $1,923.00 an ounce after retreating 2.2% Friday. Palladium rose 5.9% last month and 13% in the third quarter. It’s up 0.4% in 2022. Currently, the DG spot price is down $75.20 an ounce to $1852.00.

Spot platinum gained 0.8% last week to $950.70 an ounce, though it dropped 2.3% Friday. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 2.3% this year. The DG spot price is currently down $16.30 an ounce to $936.80.

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