Gold rises as Treasury yields weaken

Gold rises as Treasury yields weaken

Gold rises early Wednesday as Treasury yields weaken and the dollar slumps as investors anticipate a slowing of the Fed’s interest rate increases, making gold more attractive as an alternate investment.

Investors look to next week’s meeting of Federal Reserve policymakers and reports later this week on U.S. inflation and GDP for signals on the state of the economy and the pace of future interest rate hikes. The European Central Bank is also set to issue a policy decision Thursday, with the Bank of Japan following Friday.

Economic reports Tuesday pointed to a slowing economy, as U.S. consumer confidence fell in October, while housing prices retreated sharply in August. The next big data release economists are anticipating is the personal consumption price index for September – the Federal Reserve’s favorite inflation measure. 

Front-month gold futures rose 0.2% Tuesday to settle at $1,658.00 an ounce on Comex. The December contract advanced 0.1% in the first two days of the week. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 9.3% this year. The December contract is currently up $9.40 (+0.57%) an ounce to $1667.40 and the DG spot price is $1666.50.

The Fed has raised interest rates by 300 basis points so far this year to 3% to 3.25%, following increases of 75 basis points each in June, July, and September. The central bank is widely expected to announce another 75 basis point hike in November to rein in the highest inflation in more than 40 years, but investors will be looking to the Fed’s statement for indications on the pace of rate hikes after that. Higher interest rates are typically bearish for gold, though the underlying inflation is bullish.

Investors are now betting there’s a 94.1% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with the remaining 5.9% projecting a 50-basis-point hike, according to the CME FedWatch Tool. A month ago, just 72.9% of investors anticipated a 75-basis-point increase, with 27.1% predicting a 50-basis-point hike. 

Consumer confidence fell this month to the lowest level since July as high inflation dampened purchasers’ buying. The Conference Board’s index dropped to 102.5 from 107.8 in September. Economists surveyed by Reuters had forecast it to come in at 106.5. 

Separate data showed home prices are shrinking at the fastest pace on record, though they remained elevated in August from a year earlier. 

Front-month silver futures gained 0.8% Tuesday to settle at $19.35 an ounce on Comex. The December contract gained 1.5% in the first two days of the week. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 17% this year. Currently, the December contract is up $0.066 (+0.34%) an ounce to $19.415 and the DG spot price is $19.62.

Spot palladium tumbled 1.9% Tuesday to $1950.50 an ounce and has retreated 4.3% so far this week. Palladium rose 5.9% last month and 13% in the third quarter. It’s up 1.9% in 2022. Currently, the DG spot price is up $44.20 an ounce to $1993.00.

Spot platinum slipped 0.1% Tuesday to $928.90 an ounce and fell 1.5% in the first two days of the week. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 4.5% this year. The DG spot price is currently up $24.90 an ounce to $949.60.

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