Gold rally continues ahead of Wednesday’s Fed meeting with gold futures dancing around the $3700 an ounce benchmark, supported by this morning’s subdued economic data and hopeful Chinese trade talk news.
Signs of declining business activity this morning out of New York State in September. The Empire State Manufacturing Survey for September reporting the general business conditions index dropped twenty-one points to -8.7, its first negative reading since June. Both new orders and shipments dropped sharply with inventories falling lower for a second consecutive month. Capital spending plans continued to be soft. Weaker economic data supports hopes that the Fed will reduce interest rates by at least 25 basis points this Wednesday.
President Trump said that U.S.-China trade negotiations were going well this morning, U.S. and Chinese officials discussing tariff rates for a second day. Treasury Secretary Scott Bessent revealed this morning that The U.S. and China have reached a “framework” deal for the social media outlet. The Trump administration faced a Sept. 17 deadline to either divest TikTok’s U.S. business or shut down.
Weak job and inflation data released last week solidified bets that the Fed will cut rates Wednesday but won’t stop there. Investors are looking for signals from the central bank on how many more times it will cut rates, with two remaining scheduled policy meetings for 2025 after this week’s. December gold futures rose 0.9% last week to settle at $3,686.40 an ounce on Comex, the metal’s fourth consecutive weekly gain. The front-month contract rallied 0.4% Friday. Bullion added 5% in August after gaining 1.2% in July and slipping 0.2% in June. It’s up 40% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The December contract is currently up $10.90 (+0.30%) an ounce to $3697.00 and the DG spot price is $3658.10. The Fed has said it closely watches jobs and inflation data when setting monetary policy. The most recent weekly initial jobless claims report from the Labor Department on Thursday showed a surprise increase to the highest level since October 2021. At the same time, the consumer price index for August posted its biggest month-on-month increase since January. The two reports were the last economic snapshot that Fed policymakers will receive before Wednesday’s policy decision. A rate cut would be considered bullish for gold, making it a more attractive alternate investment. Anticipation of a rate cut has in recent weeks weighed on both the dollar and Treasury yields, becoming less attractive assets. Gold is also elevated on geopolitical risk, which heightened after Russian drones entered Polish airspace last week. Despite a series of rate cuts last year, the Fed has yet to begin reductions in 2025. The Fed last kept interest rates unchanged in July at 4.25% to 4.50%. All of the investors tracked by the CME FedWatch Tool are betting that the Fed will reduce rates next week, with 96% expecting a 25 basis point cut and the rest anticipating a 50 basis point cut. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts last year. Front-month silver rose 3.1% last week to settle at $42.83 an ounce on Comex after the metal increased 1.6% Friday. Silver rallied 11% last month after rising 1.5% in July and increasing 9.5% in June. It rose 21% in 2024. The December contract is currently down $0.100 (-0.23%) an ounce to $42.730 and the DG spot price is $42.33 an ounce. Spot palladium gained 8% last week to $1,211.50 an ounce after increasing 0.8% Friday. Palladium decreased 7.8% in August after climbing 8.8% in July and surging 14% in June. Palladium dropped 17% last year. Currently, the DG spot price is down $42.70 an ounce to $1183.00. Spot platinum rose 1.7% last week to $1,407.90 an ounce after climbing 1.1% Friday. It rose 5.9% last month after dropping 3.9% in July and climbing 27% in June. Platinum lost 8.4% in 2024. The current DG spot price is currently up $0.50 an ounce to $1407.10. Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.