Gold rises to three-week high amid speculation that the Federal Reserve will begin cutting interest rates next year, egged on by this morning’s tepid inflation data. DG spot gold jumped $5 an ounce to over $2070.
This morning’s release of the Fed’s favorite inflation measure gave gold an added boost. The personal consumption expenditures price index (PCE) for November came in at the low end of expectations. The core PCE rose just 0.1% in November and was up 3.2% from a year ago. On a six-month basis, core PCE was up 1.9%, below the Fed’s 12-month target. The Fed’s interest rate hikes were imposed with a target of reaching 2% inflation.
Also due out Friday are reports on durable goods orders, personal income, personal spending and new home sales for November and consumer sentiment for December.
Expectations of a Fed rate cut have depressed the dollar, which was near a five-month low, as well as Treasury yields Both are bullish for gold. Lower interest rates are also typically supportive for gold.
Front-month gold futures gained 0.2% Thursday to settle at $2,051.30 an ounce on Comex, and the February contract advanced 0.8% in the first four days of the week. Markets will be closed Monday for Christmas Day. Bullion rose 3.2% last month after gaining 6.9% in October and falling 5.1% in September. The metal is up 12% in 2023. The February contract is currently up $29.50 (+1.44%) an ounce to $2080.80 and the DG spot price is $2071.90.
The CME FedWatch Tool shows that 85.5% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged in January, while 14.5% are expecting a 25 basis point cut. But that changes in March, with the central bank widely expected to cut, with another expected in May. The central bank has boosted rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level.
The Fed kept interest rates unchanged at 5.25% to 5.50% last week. The central bank watches both inflation and labor market reports when setting monetary policy. U.S. weekly initial jobless claims remained near historic lows last week, Labor Department data released Thursday showed.
But the index of leading U.S. economic indicators fell again in November, suggesting “a downshift of economic activity ahead,” according to data out Thursday. “The Conference Board forecasts a short and shallow recession in the first half of 2024.”
Also Thursday, revised figures showed the U.S. economy expanded 4.9% in the third quarter, slightly weaker than the 5.2% previously estimated by the Commerce Department.
Front-month silver futures slipped 0.2% Thursday to settle at $24.59 an ounce on Comex, and the March contract increased 1.8% in the first four days of the week. Silver advanced 12% in November after increasing 2.2% in October and decreasing 9.5% in September. It’s up 2.3% in 2023. The March contract is currently up $0.215 (+0.87%) an ounce to $24.800 and the DG spot price is $24.61.
Spot palladium fell 0.3% Thursday to $1,227.50 an ounce and has rallied 2% so far this week. Palladium lost 9.5% last month after dropping 10% in October and rising 3% in September. Palladium has plummeted 32% so far this year. Currently, the DG spot price is up $18.80 an ounce to $1252.00.
Spot platinum retreated 0.5% Thursday to $971.20 an ounce, and it gained 2.3% so far this week. Platinum fell 0.7% in November after gaining 3.5% in October and declining 6.6% in September. Platinum is down 9.2% in 2023. The DG spot price is currently up $12.10 an ounce to $984.40.
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