Gold rebounded as investors await inflation data

Gold rebounded as investors await inflation data

Gold rebounded early Monday after declining for two consecutive weeks, as investors await tomorrow’s inflation data, though prices hovered near three-week lows on a stronger dollar.

Investors are awaiting Tuesday’s release of the latest inflation data for signals on whether the Federal Reserve will hold interest rates unchanged at its next meeting in December or resume its cycle of rate increases to curb inflation. Fed Chair Jerome Powell said last week that policymakers “are not confident” that they’ve done enough to bring inflation down to the central bank’s target of 2%. Interest rate hikes are typically considered bearish for gold because they make the precious metal less attractive than other assets. 

Front-month gold futures fell 3.1% last week to settle at $1,937.70 an ounce on Comex after the December contract tumbled 1.6% Friday. Bullion gained 6.9% in October after falling 5.1% in September and dropping 2.2% in August. The metal is up 6.1% in 2023. The December contract is currently up $1.40 (+0.07%) an ounce to $1939.10 and the DG spot price is $1936.30.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.1% Friday to 868.14 metric tons, Reuters reported. 

The Fed has boosted interest rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level. The Fed kept interest rates unchanged at 5.25% to 5.50% earlier this month. The central bank has raised interest rates only once since May. 

About 85.9% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in December, while 14.1% expect it to raise rates by 25 basis points. That’s a shift from 90.9% and 9.1% on Friday. 

The consumer price index, a key inflation measure, comes out Tuesday with October data. The Fed’s favorite inflation measure, the core personal consumption expenditures price index, fell to an annual rate of 3.7% in September from 5.3% in February 2022. 

In addition to the economy, investors are watching geopolitical risk, particularly from the war in the Middle East, for further direction. Gold is a traditional hedge against uncertainty.

Front-month silver futures decreased 4.3% last week to settle at $22.28 an ounce on Comex after the December contract lost 2.7% Friday. Silver increased 2.2% last month after decreasing 9.5% in September and slipping 0.6% in August. It’s down 7.3% in 2023. The December contract is currently down $0.206 (-0.92%) an ounce to $22.075 and the DG spot price is $22.03.

Spot palladium fell 13% last week to $981.00 an ounce after it lost 3.2% Friday. Palladium dropped 10% in October after rising 3% in September and sliding 5.3% in August. Palladium has plummeted 46% so far this year. The DG spot price is currently down $22.80 an ounce to $966.50.

Spot platinum slid 9.7% last week to $850.40 an ounce after decreasing 2.2% Friday. Platinum gained 3.5% in October after declining 6.6% last month and advancing 1.7% in August. Platinum is down 21% in 2023. Currently, the DG spot price is up $6.30 an ounce to $857.80.

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