Gold rises to new record highs above $4,200 an ounce early Wednesday, fueled by speculation on Federal Reserve monetary policy and the latest trade standoff between the U.S. and China as silver soared to the highest level in decades.
Fed Chairman Jerome Powell’s comments Tuesday about weakness in the labor market were seen as indicative that interest rate easing is on the table, though being balanced with concerns about inflation. Investors are awaiting further direction from the release Wednesday of the Fed’s Beige Book, the economic reports from the 12 regional banks.
“The data we got right after the July meeting showed that … that the labor market has actually softened pretty considerably, and puts us in a situation where the two risks are closer to being in balance,” Powell said in Philadelphia.
Separately, mounting trade tensions between the U.S. and China rattled global markets, and investors sought risk-off trades.
December gold futures rose 0.7% Tuesday to settle at $4,163.40 an ounce on Comex, and the front-month contract gained 4.1% in the first two days of the week. Bullion surged 10% in September, the most in six months, after adding 5% in August and gaining 1.2% in July. It’s up 58% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The December contract is currently up $55.60 (+1.34%) an ounce to $4219.00 and the DG spot price is $4208.90.
Front-month silver futures gained 0.4% Tuesday to settle at $50.62 an ounce on Comex. The December contract rallied 7.1% in the first two days of the week. Silver rose 15% last month, the biggest monthly rally in two and a half years, after climbing 11% in August and gaining 1.5% in July. It rose 21% in 2024. The December contract is currently up $0.918 (+1.81%) an ounce to $52.540 and the DG spot price is $52.95.
Amid the standoff between the U.S. and China, the International Monetary Fund said Tuesday that higher US tariffs have so far had a smaller impact globally than expected, but that it would be “premature and incorrect” to conclude they have had no effect on economic growth.
The U.S. government shutdown – which is in its 15th day – also added to uncertainty driving investors to precious metals.
Almost 97% of the investors tracked by the CME FedWatch Tool are betting that the Fed will reduce rates by 25 basis points in October, with the rest expecting the central bank to hold rates unchanged. 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.
“If we move too quickly, then we may leave the inflation job unfinished and have to come back later and finish it,” Powell said. “If we move too slowly, there may be unnecessary losses, painful losses, in the employment market. So we’re in the difficult situation of balancing those two things.”
The Fed lowered interest rates by 25 basis points in September to 4.00% to 4.25% and is widely expected to cut rates again in October. Lower interest rates are typically bullish for gold.
Spot palladium gained 3.1% Tuesday to $1,536.00 an ounce and is up 7.4% this week. Palladium rose 14% in September after declining 7.8% in August and climbing 8.8% in July. Palladium dropped 17% last year. Currently, the DG spot price tipped down $.70 an ounce to $1543.50.
Spot platinum slipped 0.2% Tuesday to $1,651.70 an ounce. It rose 2.8% in the first two days of the week. It increased 15% in September after rising 5.9% in August and dropping 3.9% in July. Platinum lost 8.4% in 2024. The DG spot price is currently up $14.10 an ounce to $1661.60.
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