Gold pauses after Friday’s record-high

Gold pauses after Friday's record-high

Gold pauses after hitting Friday’s record-high as haven demand from geopolitical tensions support the yellow metal even as it came under pressure from investors’ delayed expectations about a Federal Reserve interest rate cut.

Iran’s drone strikes against Israel over the weekend added to the flight to safe assets – including gold – by investors and central banks. Gold capped its fourth weekly gain last week. But weak consumer sentiment data on Friday following unexpectedly high inflation reports earlier last week spurred speculation that the Fed will delay its planned interest rate cuts. That kept a lid on prices. High interest rates are considered bearish for gold, while lower ones are bullish.

Front-month gold futures gained 1.2% last week to settle at $2,374.10 an ounce on Comex after the most-active June contract increased $1.40 Friday. Bullion rose 8.9% in March – the biggest monthly rise in more than three years – after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The June contract is currently down $28.50 (-1.20%) an ounce to $2345.60 and the DG spot price is $2340.30.

G-7 leaders on Sunday condemned Iran’s attack on Israel, though U.S. President Joe Biden sought to head off an escalation in the region. The situation – specifically what Israel will do to retaliate – is expected to trigger market volatility this week.

In economic news, U.S. consumer sentiment fell more than expected in April amid climbing inflation, according to the University of Michigan’s consumer sentiment index released Friday. The index fell to 77.9 in April from 79.4 in March, and well below economists’ estimates of a 79 reading. 

Earlier in last week, U.S. consumer price index data topped forecasts for March. So-called core CPI – which excludes volatile food and energy costs – rose 0.4% last month from February, while the year-on-year rate was unchanged at 3.8%, according to U.S. government data. Wholesale prices also heated up again last month, according to producer price index data released separately. 

The Fed closely watches both labor market conditions and inflation when determining monetary policy.  

Fed officials including Dallas Fed president Lorie Logan, New York Fed President John Williams, and San Francisco Fed President Mary Daly are all scheduled to make public appearances Monday and may provide further direction. Fed Chairman Jerome Powell is scheduled to speak Tuesday.

About 96.3% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 3.7% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last month. More than three quarters of investors also expect the Fed to hold rates at current levels in June, with about half anticipating a rate cut in July.

Front-month silver futures rose 3% last week to settle at $28.33 an ounce on Comex, as the May contract advanced 0.3% Friday. Silver gained 8.9% in March after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023. The May contract is currently down $0.130 (-0.46%) an ounce to $28.200 and the DG spot price is $28.34.

Spot palladium increased 5.5% last week to $1,070.00 an ounce after rising 1.7% Friday. Palladium advanced 7.7% last month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. Currently, the DG spot price is down $26.50 an ounce to $1038.00.

Spot platinum gained 6.2% last week to $991.80 an ounce after gaining 0.9% Friday. Platinum rose 3.3% last month after decreasing 4.9% in February and falling 8% in January. Platinum dropped 6.8% in 2023. The DG spot price is currently down $27.30 an ounce to $966.40.

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