Gold poised for weekly gain on dollar, Mideast

Gold poised for weekly gain on dollar, Mideast

Gold poised for weekly gain after edging higher early Friday on a weaker dollar and geopolitical uncertainty, including the ongoing conflicts in the Mideast and Ukraine.

The U.S. currency was heading for the first weekly drop in almost two months, making the yellow metal a more attractive investment and more affordable to holders of other currencies. Gold is also a traditional hedge against unrest.

But strong economic data signaled that the Federal Reserve is likely to keep interest rates high for a few more months, pressuring gold. Higher interest rates are typically considered bearish for gold. In the latest round of economic news Thursday, U.S. initial jobless claims unexpectedly fell last week, a sign that the labor market remains resilient and able to tolerate high interest rates.

Front-month gold futures slipped 0.2% Thursday to settle at $2,030.70 an ounce on Comex, though the most-active April contract is up 0.3% so far this week. Comex trading on Monday didn’t settle until Tuesday because of the U.S. Presidents Day holiday, which shuttered government offices, banks and financial markets. Bullion declined 0.2% in January after gaining 0.7% in December and rising 3.2% in November. The metal rose 13% in 2023. The April contract is currently up $4.20 (+0.21%) an ounce to $2034.90 and the DG spot price is $2025.70.

Applications for U.S. unemployment benefits fell to the lowest level in a month last week, declining by 12,000 to 201,000 jobs, according to data released Thursday by the Labor Department. The figure was lower than all of economists estimates gathered by Bloomberg. 

The minutes of the Fed’s last policy meeting, which came out Wednesday, showed that policymakers are cautious about lowering rates too quickly and are worried about the “risks of moving too quickly.” The Fed is targeting 2% inflation. 

Last week, the U.S. consumer price index and producer price index came in hotter than expected for January, making it less likely that the Fed will cut rates in the next few months.The Fed’s favorite inflation measure, the personal consumption expenditures price index, is due out on Feb. 29 with January figures and is likely to provide further direction.

“I would like to have greater confidence that inflation is converging to 2% before beginning to cut the policy rate,” Fed Governor Lisa Cook said Thursday in prepared remarks delivered at Princeton University. 

About 97.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged next month, while 2.5% expect a 25 basis point cut. A majority of investors tracked by the tool now also anticipate the Fed will hold rates steady at the following policy meeting in May, too. Most are now looking to June for a rate 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% earlier this month. 

May silver futures fell 0.4% Thursday to settle at $23.00 an ounce on Comex. The front-month contract, which rolled to May from March this week, retreated 2% so far this week. Silver fell 3.8% in January after dropping 6.1% in December and advancing 12% in November. It ticked up 0.2% in 2023. The May contract is currently down $0.018 (-0.08%) an ounce to $22.985 and the DG spot price is $22.75.

Spot palladium gained 1.7% Thursday to $979.00 an ounce and is up 2% this week. Palladium tumbled 11% last month after advancing 8.6% in December and losing 9.5% in November. Palladium plummeted 38% last year. The current DG spot price is up $10.80 an ounce to $991.00.

Spot platinum gained 2.1% Thursday to $907.80 an ounce, though it’s down 0.5% so far this week. Platinum fell 8% last month after rising 8.1% in December and falling 0.7% in November. Platinum dropped 6.8% in 2023. The DG spot price is currently up $2.90 an ounce to $909.40.

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