Gold Off Nine-Month High

Gold Off Nine-Month High

Gold slips off nine-month high early Wednesday on profit-taking and a firmer dollar as investors awaited key economic news at the end of the week and the Federal Reserve’s next interest rate hike next week.

The prospect of a smaller rate increase by the Fed has given gold a boost because the precious metal comes under pressure from higher rates, which diminish its attractiveness as a haven asset. 

Two major economic reports are due out before the Fed meeting – fourth-quarter U.S. GDP on Thursday and the Fed’s favorite inflation measure, the personal consumption expenditures price index, or PCE, on Friday. Both will be closely watched for further indications of the Fed’s likely next moves. Fed policymakers are set to announce their next rate decision on Feb. 1.

Front-month gold futures rose 0.4% Tuesday to settle at $1,952.20 an ounce on Comex. The April contract also advanced 0.4% in the first two days of the week. Bullion gained 3.8% in December after increasing 7.3% in November. It was the first two-month rally since March. The metal fell $2.40 in 2022. The February contract is currently down $6.5 (-0.34%) and ounce to $1928.90 and the DG spot price is $23.66.

Almost all the investors tracked by the CME FedWatch Tool are now betting that the Fed will boost interest rates by just 25 basis points next week, compared with 65.9% a month ago. The tool shows 98.1% of investors anticipating a 25-basis-point hike, with the remaining 1.9% expecting the Fed to leave rates unchanged. 

The Fed raised rates by 50 basis points in December and by 75 basis points each in June, July, September and November. Rates went up by 425 basis points in 2022 to 4.25% to 4.5%, the highest level in 15 years. 

The GDP report Thursday will indicate whether the economy is slowing, while the PCE report Friday will likely cement sentiment on whether the Fed’s interest rate hikes are having enough impact on inflation and what the central bank will do next. 

Both the producer price index and consumer price index fell in December. The PPI, released last week, showed that wholesale prices fell 0.5% last month, more than estimated and the largest decrease on a monthly basis since April 2020. The prior week, a report showed the CPI fell 0.1% in December from a month earlier. It was the biggest monthly decrease since the early days of the COVID-19 pandemic. 

In other economic news, the U.S. weekly initial jobless claims are due out Thursday, along with durable goods orders and new home sales for December. The University of Michigan’s consumer sentiment index for January also comes Friday.

Front-month silver futures increased 0.8% Tuesday to settle at $23.75 an ounce on Comex, though the March contract was down 0.8% in the first two days of the week. Silver rose 10% in December after increasing 14% in November, its biggest monthly gain since December 2020. It advanced 3% in 2022. Currently, the March contract is down $0.124 (-0.52%) an ounce to $23.625 and the DG spot price is $23.65.

Spot palladium gained 1.8% Tuesday to $1,759.00 an ounce and is up 0.8% so far this week. Palladium tumbled 4% in December after gaining 0.3% in November. It lost 5.7% in 2022. Currently, the DG spot price is down $15.50 an ounce to $1745.00.

Spot platinum rallied 0.6% Tuesday to $1,064.20 an ounce and is up 1.4% so far this week. Platinum increased 3.4% last month after rising 11% in November, its best month since February 2021. It surged 10% in 2022. The DG spot price is currently down $21.00 an ounce to $1045.70.

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