Gold poised for third weekly gain

Gold poised for third weekly gain

Gold poised for a third consecutive weekly gain Friday as the conflict in the Middle East propped up prices while expectations that the Federal Reserve would leave interest rates high for some time pressured them. The yellow metal drifted down after the release of this morning’s inflation data.

Inflation tipped up in September according to the Commerce Department’s report. The Federal Reserve’s favored key measure of inflation, the core personal consumption expenditures price index, rose 0.3% for the month, meeting the Dow Jones forecast while above August’s 0.1% level. Even with the pickup in prices, personal spending kept up and then some, rising 0.7%, besting the 0.5% forecast.

Front-month gold futures edged up 0.1% Thursday to settle at $1,997.40 an ounce on Comex as the December contract gained 0.2% in the first four days of the week. Bullion is up 7% so far this month after falling 5.1% in September and dropping 2.2% in August. The metal is up 9.4% in 2023. The December contract is currently down $10.10 (-0.51%) an ounce to $1987.30 and the DG spot price is $1982.90.

The U.S. carried out two airstrikes against eastern Syria early Friday, at facilities the Pentagon said were used by Iran’s Islamic Revolutionary Guard and its proxies. The move was in retaliation for rocket and drone attacks against American forces in Iraq and Syria. Meanwhile, Israeli officials signaled that it was ready for a ground assault in Gaza. 

Fears that the conflict in the Middle East will spread have bolstered gold prices, which are a traditional hedge against geopolitical uncertainty. 

In economic news, U.S. third-quarter GDP grew at a better-than-expected 4.9% annual pace in the third quarter, a sign that the economy is resilient in the face of the Fed’s series of interest rate hikes. Separately Thursday, weekly initial jobless claims for last week ticked up slightly. 

The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to curb inflation and is expected to to keep interest rates unchanged at 5.25% to 5.50% in November, following a pause in September. Lower interest rates – or a pause in rate hikes – is considered bullish for gold because the yellow metal comes under pressure when rates go up and other assets become more attractive.

About 99.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November, while 0.6% expect it to raise rates by 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold. 

The European Central Bank held interest rates unchanged Thursday after 10 consecutive interest rate hikes to curb inflation. 

Front-month silver futures decreased 0.4% Thursday to settle at $22.91 an ounce on Comex after the December contract retreated 2.5% in the first four days of the week. Silver has increased 2% so far this month after decreasing 9.5% last month and slipping 0.6% in August. It’s down 4.7% in 2023. The December contract is currently down $0.053 (-0.23%) an ounce to $22.885 and the DG spot price is $22.92.

Spot palladium gained 1.4% Thursday to $1,150.00 an ounce, though it’s up 2.5% this week.  Palladium has dropped 9.1% in October after rising 3% last month and sliding 5.3% in August. Palladium has plummeted 36% so far this year. Currently, the DG spot price is up $4.20 an ounce to $1150.00.

Spot platinum slid 0.6% Thursday to $909.90 an ounce, though it gained 0.4% in the first four days of the week. Platinum is down 0.1% in October after declining 6.6% last month and advancing 1.7% in August. Platinum is down 15% in 2023. The DG spot price is currently up $3.90 an ounce to $912.90.

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