Gold rose early Friday after spot gold hit its lowest point since May 9, but still headed for its first weekly fall in three as expectations for interest rate cuts began to fade following the hawkish tone adopted in the U.S. Federal Reserve’s latest minutes.
The Federal Reserve’s meeting minutes released on Wednesday squashed hopes for rate cuts indicating decisions that would “involve maintaining” interest rates at current levels. The minutes even reflected discussions of possible hikes. High interest rates are typically bearish for gold, making them a less attractive alternate investment than some other assets. Gold also came under pressure this week from profit taking after the yellow metal hit a series of new record highs.
Members of the Federal Open Markets Committee indicated at a meeting earlier this month that it would probably take longer than they’d previously thought to start interest rate cuts because of persistently high inflation, according to the minutes released Wednesday.
U.S. durable goods orders and University of Michigan consumer sentiment data come out Friday and may influence markets.
Front-month gold futures fell 2.3% Thursday to settle at $2,359.70 an ounce on Comex, as the most-active August contract tumbled 2.4% in the first four days of the week. Bullion has gained 2.5% so far this month after rallying 2.9% in April and rising 8.9% in March – the biggest monthly gain in more than three years. The metal rose 13% in 2023. The June contract is currently up $5.50 (+0.24%) an ounce to $2342.70 and the DG spot price is $2340.40.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, comes out next week with April data. Consumer price index data for April, which came out last week, showed that inflation eased, even as it remained well above the Fed’s 2% target.
“Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the committee’s 2 percent objective,” the minutes stated.
The Fed has raised interest rates by 5.25 percentage points since March 2022 in an effort to rein in inflation but has held rates steady at its last few policy meetings.
About 99.1% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while .9% expect a 25 basis point increase. Almost 85% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting.
July silver futures dropped 3.3% Thursday to settle at $30.46 an ounce on Comex, and the front-month contract is down 2.6% so far this week. Silver is up 14% this month after rising 7% in April and gaining 8.9% in March. It ticked up 0.2% in 2023. The July contract is currently up $0.265 (+0.87%) an ounce to $30.720 and the DG spot price is $30.49.
Spot palladium dropped 3.4% Thursday to $979.00 an ounce and decreased 3.6% so far this week. Palladium is up 1.2% in May after declining 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. The current DG spot price is down $4.70 to $976.50.
Spot platinum lost 1.9% Thursday to $1,027.00 an ounce and is down 5.8% so far this week. Platinum is up 8.9% in May after gaining 3.1% in April and rising 3.3% in March. Platinum dropped 6.8% in 2023. The DG spot price is currently up $9.30 an ounce to $1038.70.
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