Gold rises early Wednesday after the minutes of the Federal Reserve’s last policy meeting, which were released Tuesday, showed that the central bank is confident that inflation is easing and the labor market is strong, both conditions for additional interest rate cuts.
Investors were closely awaiting the release of the Fed’s favorite inflation measure, the personal consumption expenditures index for October, on Wednesday morning at 9 am Central, for further direction.
Fed policymakers voted unanimously at November’s meeting to cut interest rates by 25 basis points to 4.50% to 4.75%. The central bank also cut rates in September. Before those reductions, the Fed had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022. The Fed began raising rates during the pandemic to combat surging inflation. Interest rates cuts are typically bullish for gold, which becomes a more attractive investment.
Front-month gold futures rose 0.1% Tuesday to settle at $2,646.30 an ounce on Comex, though the most-active February contract fell 3.3% in the first two days of the week. Bullion is down 3.8% this month after rising 3.4% in October and gaining 5.2% in September. The metal is up 28% in 2024. The February contract is currently up $29.30 (+1.11%) an ounce to $2675.60 and the DG spot price is $2655.50.
Prices are likely to be volatile this week with many U.S. traders out of the market for the Thanksgiving holiday long weekend.
Also out Tuesday was data which showed consumer confidence in November rose to the highest level in 16 months. That should also bolster the picture for an upcoming rate cut.
About two-thirds of the investors tracked by the CME FedWatch Tool are betting that the Fed will cut rates by another 25 basis points in December, ending the year at 4.25% to 4.50%. The rest expect the central bank to keep rates unchanged next month. But the percentage of those expecting the Fed to cut rates increased in the past day.
In addition to the PCE index, third-quarter GDP data and weekly initial jobless claims figures are due out Wednesday. The Fed has said it closely watches both inflation and jobs data when determining monetary policy.
Traders are also following President Donald Trump’s plans for increased tariffs and tax cuts, which could trigger a resurgence of inflation, as well as geopolitical risk from the Middle East and Ukraine. But gold is a traditional hedge against both economic and geopolitical uncertainty, so both could be bullish for the precious metal.
A ceasefire between Israel and Hezbollah in Lebanon was announced Tuesday and began early Thursday, lessening some of the immediate geopolitical risk.
Front-month silver futures gained 0.6% Tuesday to $30.83 an ounce on Comex, though the most-active March contract decreased 3% in the first two days of the week. Silver is down 6% this month after advancing 4.3% in October and rallying 7.9% in September. It’s up 28% in 2024. The March contract is currently up $0.063 (+0.20%) an ounce to $30.895 and the DG spot price is $30.48.
Spot palladium increased 0.1% Tuesday to $991.50 an ounce, though it’s down 3.4% so far this week. Palladium is down 12% this month after increasing 11% in October and gaining 3.2% in September. Palladium is down 11% this year. Currently, the DG spot price is down $8.30 an ounce to $988.50.
Spot platinum dropped 1.4% Tuesday to $930.70 an ounce and is down 4.4% so far this week. Platinum has dropped 6.8% so far this month after rising 1.5% in October and increasing 5.6% in September. Platinum is down 6.7% this year. The DG spot price is currently up $6.20 an ounce to $938.10.
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