Gold edged higher early Friday, rising from one-week low though it remained near a one-week low amid expectations that the Federal Reserve will continue its cycle of interest rate hikes for a bit longer.
The Fed held its benchmark interest rate at 5.25% to 5.50% Wednesday, but the Fed statement seemed to indicate that one more increase this year may be in the cards. Still, Fed Chair Jerome Powell signaled that the central bank is almost done with its series of interest rate hikes to curb inflation.
U.S. 10-year Treasury yields reached the highest level in 16 years on the prospect of an additional rate hike, pressuring gold, which becomes a less attractive investment when Treasury yields and the dollar go up. But an end to Fed rate hikes would be considered bullish for gold as an alternative investment.
Front-month gold futures fell 1.4% Thursday to settle at $1,939.60 an ounce on Comex, and the December contract dropped 0.3% in the first four days of the week. Bullion dropped 2.2% in August after rising 4.1% in July and losing 2.7% in June. The metal is up 6.2% in 2023. The December contract is currently up $7.6 (+0.39%) an ounce to $1947.20 and the DG spot price is $1927.90.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.07% Thursday to 878.83 metric tons, Reuters reported.
Powell said the Fed can now “proceed carefully” in its next steps, though he cautioned that policymakers still face a lot of uncertainty. Twelve of 19 Fed officials said they still expect to raise rates once more this year in quarterly economic projections released after the policymakers’ meeting.
About 72.6 % of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in. Just 27.4% expect it to raise rates another 25 basis points. There is also a meeting scheduled for December.
The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to curb inflation.
The Bank of England ended a run of 14 straight interest rate hikes this week, holding rates unchanged in a monetary policy decision Thursday, after new data showed inflation running below expectations. The Bank of Japan also left rates unchanged Friday, citing “extremely high uncertainties” in economic growth. The European Central Bank announced a 10th consecutive interest rate hike last week.
A legislative standoff in the U.S. Congress raised the prospect of a government shutdown in just 10 days, boosting gold’s attractiveness as a hedge against uncertainty.
Front-month silver futures decreased 0.6% Thursday to settle at $23.69 an ounce on Comex, though the December contract gained 1.3% in the first four days of the week. Silver slipped 0.6% in August after gaining 8.5% in July and dropping 2.4% in June. It’s down 1.5% in 2023. The December contract is currently up $0.198 (+0.84%) an ounce to $23.885 and the DG spot price is $23.66.
Spot palladium dropped 0.9% Thursday to $1,285.50 an ounce and advanced 1.5% so far this week. Palladium slid 5.3% last month after rising 3.6% in July and falling 9.5% in June. Palladium has plummeted 29% so far this year. Currently, the DG spot price is down $2.00 an ounce to $1279.50.
Spot platinum slid 1.4% Thursday to $929.20 an ounce and is down 0.6% so far this week. Platinum advanced 1.7% in August after gaining 5.2% in July and falling 9.3% in June. Platinum is down 13% in 2023. The DG spot price is currently up $13.40 an ounce to $940.90.
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