Gold once again nears $1,800 on bargain hunting as investors buy the dips. The yellow metal looks headed for its worst month since September, as the dollar strengthened, and new inflation data released Friday reinforced the Fed’s inclination to tighten monetary policy and raise interest rates.
The dollar hovered near an 18-month high reached Friday on the prospect of a rate increase. Higher rates are considered bearish for gold, but, given that the precious metal is a typical hedge against inflation, the rising costs of goods and services are bullish.
The U.S. government’s personal consumption expenditure price index, the Fed’s favored inflation measure, rose 4.9% in December, compared with a year earlier, the fastest gain since September 1983.
Front-month gold futures dropped 2.6% last week to settle at $1,786.60 an ounce on Comex, the lowest closing price since Dec. 15, after the April contract fell 0.5% Friday. Gold is down 2.3% in January after advancing 2.9% in December — its best month since May. It dropped 3.5% in 2021. The April contract is up $10.40 (+0.58%) an ounce to $1,797.00 and the DG spot price is $1,798.50.
Fed Chairman Jerome Powell said Wednesday that central bank policymakers are “of a mind to raise the federal funds rate at the March meeting, assuming that the conditions are appropriate for doing so.” The presidents of the San Francisco and Kansas City Fed branches are scheduled to speak Monday and may provide further insight.
The CME FedWatch Tool shows that 100% of traders now expect a rate increase at the March meeting, compared with 56.5% a month ago. Money markets are now pricing in as many as five rate increases this calendar year, according to news reports.
Investors are awaiting some key economic data this week for additional direction, including first-of-the-month manufacturing figures from all major economies on Tuesday and the January U.S. employment report on Friday.
Gold prices also continued to be supported by tensions between Russia and Ukraine and Western powers and the track of the omicron variant of the coronavirus.
March silver futures decreased 8.3% last week to $22.330 an ounce on Comex after the front-month contract dropped 1.7% Friday. Silver is down 4.5% in January after gaining 2.4% in December. It fell 12% in 2021. Silver prices are tied to industrial demand. The March contract is currently up $0.154 (+0.69%) an ounce to $22.455 and the DG spot price is $22.56.
Spot palladium rose 13% last week to $2,394.00 an ounce and added 0.4% Friday. Palladium is up 25% this month after rallying 9.6% in December. It fell 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. Currently, the DG spot price is up $55.20 an ounce, bringing the metal back over the $2,400 line to $2,450.60.
Spot platinum declined 2.7% last week to $1,014.10 an ounce after it slid 1.5% Friday. The metal is up 4.2% in January after gaining 2.9% in December. It lost 9.4% last year. The DG spot price is currently up $9.20 an ounce to $1,023.80.
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