Gold rises as dollar ebbs

Gold rises as dollar ebbs

Gold rises headed toward the biggest monthly gain in two-years as the dollar ebbs. The currency softened as investors awaited comments later in the day from Federal Reserve Chairman Jerome Powell for further direction and eye the ongoing tensions in China.

The decline in the U.S. dollar makes gold more attractive to holders of other currencies. But most attention in the market was on Powell, who is likely to provide clues on the Fed’s plans for interest rate hikes next month and into next year. The ADP employment report also comes out Wednesday, offering the first signs about the state of the U.S. labor market in November.

Front-month gold futures rose 0.5% Tuesday to settle at $1,763.70 an ounce on Comex, though the February contract is down 0.3% so far this week. Bullion is up 7.5% this month after falling 1.9% in October, its seventh straight month of declines. The metal is down 3.6% this year. The February contract is currently up $3.90 (+0.22%) an ounce to 1767.60 and the DG spot price is $1753.70.

Investors are hoping Powell will offer additional signs that the Fed is considering slowing the pace of its series of interest rate hikes to curb 40-year highs in inflation. The minutes of last month’s meeting of Fed policymakers, released last week, showed more officials were amenable to a smaller rate increase in December. 

The Fed has raised interest rates by 375 basis points this calendar year to 3.75% to 4%. There were increases of 75 basis points each in June, July, September and November. High rates are typically bearish for gold, because they make the yellow metal less attractive than other assets.

Investors are betting there’s a 67.5% chance the Fed will raise interest rates by 50 basis points in December, compared with 48.2% a month ago. About 32.5% of investors tracked by the CME FedWatch Tool are projecting another 75-basis-point hike, compared with 43.4% a month ago. 

Two key economic reports due later this week are likely to influence the Fed’s decision. 

The Fed’s favorite inflation measure, the personal consumption expenditures price index for October, is set for release Thursday, and Friday brings the critical U.S. jobs report for November. Additionally, the ISM manufacturing index for November and U.S. initial jobless claims for last week come out Thursday.

Front-month silver futures rose 1.5% Tuesday to settle at $21.44 an ounce on Comex. the March contract is down 0.8% this week. Silver is up 12% this month after advancing 0.4% in October, it’s second consecutive monthly increase. It’s down 8.2% this year. The March contract is currently up $0.404 (+1.88%) an ounce to $21.840 and the DG spot price is $21.67.

Spot palladium retreated 0.8% Tuesday $1,849.00 an ounce and is down 0.8% this week. Palladium is down 1.3% this month after declining 15% in October. It’s down 3.5% in 2022. The current DG spot price is up $28.60 an ounce to $1882.50.

Spot platinum increased 1.2% Tuesday to $1,009.20 an ounce and is up 2.3% this week. Platinum is up 7.8% this month after gaining 7.3% in October. It’s up 3.7% this year. Currently, the DG spot price is up $27.40 an ounce to $1035.60.

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