Gold poised for weekly drop on dollar, yields

Gold poised for weekly drop on dollar, yields

Gold poised for a weekly drop as speculation mounted that the Federal Reserve will keep interest rates high for some time, supporting the dollar and Treasury yields. Prices ticked higher Friday.

U.S. weekly initial jobless claims unexpectedly fell to the lowest level since February in data released Thursday, signaling that the labor market remains resilient despite the Fed’s series of rate hikes. Applications for new unemployment benefits dropped to 216,000 last week, data from the Labor Department showed. The figure was lower than all economists’ forecasts. 

Front-month gold futures fell 0.1% Thursday to settle at $1,942.50 an ounce on Comex. The December contract is down 1.3% so far this week. Comex futures and options traded without a settlement Monday because of the U.S. Labor Day holiday. Bullion dropped 2.2% in August after rising 4.1% in July and losing 2.7% in June. The metal is up 6.4% in 2023. The December contract is currently up $5.60 (+0.29%) an ounce to $1948.10 and the DG spot price is $1925.60.

Dallas Fed President Lorie Logan said Thursday that while it may be appropriate to skip an interest rate hike at central bank policymakers’ meeting this month, more increases may yet be necessary. Rate hikes are typically bearish for gold, making the yellow metal a less attractive investment than other assets.

The Fed has raised rates by 5.25 percentage points since March 2022. About 95% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged this month at 5.25% to 5.50%. Just 5% expect it to raise rates another 25 basis points. Most still expect the Fed to hold in November and December, too, but by much slimmer margins.

“There is work left to do,” she said Thursday at Southern Methodist University. “After the unacceptably rapid price increases of the past several years, I’m not yet convinced that we’ve extinguished excess inflation.”

In other economic news, the Fed’s Beige Book report on regional economic conditions showed that the U.S. economy and jobs market slowed in July and August. Investors will be awaiting data on wholesale inventories and consumer credit data for July on Friday for further direction. 

Front-month silver futures lost 1.1% Thursday to settle at $23.24 an ounce on Comex, and the December contract retreated 5.4% in the first four days of the week. Silver slipped 0.6% in August after gaining 8.5% in July and dropping 2.4% in June. It’s down 3.3% in 2023. The December contract is currently up $0.070 (+0.30%) an ounce to $23.310 and the DG spot price is $23.09.

Spot palladium increased 0.7% Thursday to $1,233.00 an ounce, and it’s down 0.6% so far this week. Palladium slid 5.3% last month after rising 3.6% in July and falling 9.5% in June. Palladium has plummeted 32% so far this year. The current DG spot price is up $8.50 an ounce to $1238.50.

Spot platinum declined 0.4% Thursday to $914.20 an ounce and dropped 5.8% so far this week. Platinum advanced 1.7% in August after gaining 5.2% in July and falling 9.3% in June. Platinum is down 15% in 2023. The DG spot price is currently up $1.80 an ounce to $914.40.

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