Gold rises on weakened dollar

Gold rises on weakened dollar

Gold rises early Monday as the dollar weakened amid hopes of a Federal Reserve rate cut in June.

The yellow metal touched a record high above $2,200 an ounce last week after Fed policymakers reiterated last week that the central bank expects to cut interest rates three times this year despite reports of higher inflation. Most investors are expecting the first rate cut this summer. Lower interest rates would be considered bullish for the yellow metal, making it a more attractive asset for investors. 

A weaker dollar is also bullish for gold, and the yellow metal has seen some haven demand related to the wars in Ukraine and Gaza, which has helped prop up prices. 

Front-month gold futures slipped $1.50 last week to settle at $2,160.00 an ounce on Comex after the most-active April contract fell 1.1% Friday. Bullion is up 5.1% so far this month after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The April contract is currently up $14.60 (+0.68%) an ounce to $2174.60 and the DG spot price is $2179.10.

About 91.2% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 8.8% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last week. Most investors are expecting a rate cut in June.

Still, Atlanta Fed President Raphael Bostic said Friday that he just expects a single quarter-point interest rate cut this year, rather than the two he had previously forecast. 

The Fed closely tracks both inflation and labor market data when determining monetary policy. 

Investors are awaiting Friday’s release of the Fed’s favorite inflation measure, the personal consumption expenditure price index, for further direction. Economists estimate that the PCE index rose 0.3% last month, which would keep the annual pace at 2.8%, above the Fed’s 2% annual target. The core U.S. consumer price index, the cost of goods excluding volatile food and energy prices, came in above forecasts for the second consecutive month.  

Many markets around the world will close Friday for the Good Friday holiday, though Comex is open. Still, the full response to the report isn’t likely to come until next week. 

The end of next week will also bring the widely anticipated U.S. monthly jobs report for March. Fed Chairman Jerome Powell said after the Fed’s policy announcement last week that a surprise increase in unemployment could spur the Fed to cut rates. 

Front-month silver futures fell 2.1% last week to settle at $24.84 an ounce on Comex, and the May contract retreated 0.7% Friday. Silver has advanced 8.6% so far this month after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023. The May contract is currently up $0.037 (+0.15%) an ounce to $24.880 and the DG spot price is $2178.50

Spot palladium decreased 8.6% last week to $1,002.00 an ounce after dropping 1.9% Friday. Palladium is up 5% this month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. The current DG spot price is up $25.70 an ounce to $1029.00.

Spot platinum retreated 4.8% last week to $900.60 an ounce after losing 1.7% Friday. Platinum is up 1.7% this month after decreasing 4.9% in February and falling 8% in January. Platinum dropped 6.8% in 2023. The DG spot price is currently up $14.80 an ounce to $916.20.

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