Gold retreats from record highs early Wednesday as the dollar strengthened and investors await direction from the Fed later today.
The central bank is overwhelmingly expected to cut interest rates by 25 basis points Wednesday afternoon, but more eyes will be on policymakers’ statement at the end of their meeting and Chairman Jerome Powell’s comments for signals on next steps. Weakness in the job market and climbing inflation have some economists forecasting a series of rate cuts through the end of the year. Lower interest rates are typically bullish for gold, making it a more attractive alternate investment.
December gold futures rose 0.2% Tuesday to settle at $3,725.10 an ounce on Comex, and the front-month contract rallied 1.1% in the first two days of the week. Bullion added 5% in August after gaining 1.2% in July and slipping 0.2% in June. It’s up 41% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The December contract is currently down $10.30 (-0.28%) an ounce to $3714.80 and the DG spot price is $3677.40.
The strength in the dollar early Wednesday tempered gold’s advance and helped pressure it down from record highs. Gold becomes more expensive for holders of other currencies with the dollar goes up.
All of the investors tracked by the CME FedWatch Tool are betting that the Fed will reduce rates next week, with 94% 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.
There are two remaining scheduled policy meetings for 2025 after this one. 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%.
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.
Separately, Hong Kong Chief Executive John Lee on Wednesday announced a series of policies that will boost the city as a global hub for gold trading. They include boosting Hong Kong’s capacity to hold bullion to more than 2,000 tons over the next three years and to establish a central clearing system for gold, Bloomberg reported.
Front-month silver slipped 0.1% Tuesday to settle at $42.92 an ounce on Comex. The metal increased 0.2% in the first two days of the week. 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 $0.662 (-1.54%) an ounce to $42.255 and the DG spot price is $42.04.
Spot palladium fell 1.6% Tuesday to $1,177.00 an ounce after decreasing 2.9% in the first two days of the week. Palladium decreased 7.8% in August after climbing 8.8% in July and surging 14% in June. Palladium dropped 17% last year. The current DG spot price is down $15.00 an ounce to $1170.00.
Spot platinum dropped 1% Tuesday to $1,394.10 an ounce and is down 1% so far this week. It rose 5.9% last month after dropping 3.9% in July and climbing 27% in June. Platinum lost 8.4% in 2024. The DG spot price is currently down $20.80 an ounce to $1381.70.
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