Gold remains near a two-month high, hovering around the $2,100 an ounce benchmark, as speculation firmed that the Federal Reserve will cut interest rates in June after a series of economic reports last week.
Investors are awaiting Friday’s U.S. monthly jobs report for February, a key economic indicator, for further direction. The Fed closely tracks both labor market and inflation data when determining monetary policy. Lower interest rates are considered bullish because they make gold a more attractive asset for investors.
Fed Chair Jerome Powell is also set to testify before Congress on Wednesday and Thursday, and a number of Fed official are additionally scheduled to speak this week.
Front-month gold futures rose 2.3% last week to settle at $2,095.70 an ounce on Comex after the most-active April contract gained 2% Friday. Bullion dropped 0.6% in February after declining 0.2% in January and gaining 0.7% in December. The metal rose 13% in 2023. The April contract is currently up $8.0 (+0.38%) an ounce to $2103.70 and the DG spot price is $2098.60.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, came in in line with economists’ estimates last week. Excluding volatile food and energy costs, so-called core-PCE increased 0.4% month on month in January and 2.8% from a year earlier. Top-line PCE, including food and energy costs, increased 0.3% for the month and 2.4% on a 12-month basis. The Fed is targeting 2% inflation.
But U.S. factory activity shrank at a faster pace in February, according to the key manufacturing report from the Institute for Supply Management, which came out Friday, signaling that the economy may be softening. The report came in below all but one estimate in a Bloomberg survey of economists. Production and factory employment dropped to the lowest levels since July.
In addition to the Labor Department’s jobs report Friday, investors will be closely watching the private payrolls report Wednesday from ADP and the weekly initial jobless claims report out Thursday from the Labor Department.
More than a dozen U.S. states are holding Republican and Democratic primary elections on Tuesday and may finalize the U.S. presidential race in November.
About 97% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged this month, while 3% expect a 25 basis point cut. Most investors tracked by the tool now also anticipate the Fed will hold rates steady at the following policy meeting in May. 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. High interest rates are typically considered bearish for gold.
Front-month silver futures rose 0.8% last week to settle at $23.36 an ounce on Comex after the May contract rallied 2.1% Friday. Silver lost 1.2% in February after falling 3.8% in January and dropping 6.1% in December. It ticked up 0.2% in 2023. The May contract is currently up $0.241 (+1.03%) an ounce to $23.605 and the DG spot price is up $23.47.
Spot palladium decreased 3.2% last week to $967.50 an ounce but gained 1.4% Friday. Palladium fell 4.6% in February after tumbling 11% in January and advancing 8.6% in December. Palladium plummeted 38% last year. Currently, the DG spot price is down $7.00 an ounce to $961.50.
Spot platinum slid 2.2% last week to $890.60 an ounce, though it rose 0.6% Friday. Platinum decreased 4.9% in February after falling 8% in January and rising 8.1% in December. Platinum dropped 6.8% in 2023. The DG spot price is currently up $8.10 an ounce to $897.10.
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