Gold Rose on soft dollar

Gold rose on soft dollar

Gold rose early Monday on a soft dollar as the currency slipped against the British pound and the Japanese yen amid expectations that the U.K. may reverse some more of its unfunded tax cuts that Japan’s central bank may intervene to support the yen.

The yellow metal stood strong on this morning’s Empire State Manufacturing Survey that showed manufacturing activity in the New York State shrunk for the third straight month. The survey’s general business conditions index decreased to minus 9.1 in October from minus 1.5 in September.

A weaker dollar is typically bullish for gold. Still, the bullion remains under pressure amid anticipation of continued aggressive monetary policy by the Federal Reserve and other central banks because of the highest inflation in more than 40 years. Inflation figures which came out last week make it more likely that the Fed will impose another 75 basis point interest rate increase at policymakers’ next meeting in early November. 

Gold also gained early Monday amid technical buying following Friday’s selloff.

Front-month gold futures tumbled 3.5% last week to settle at $1,648.90 an ounce on Comex after the December contract dropped 1.7% Friday. Bullion fell 3.1% in September and 7.5% in the third quarter. The metal is down 9.8% this year. Currently, the December contract is solidly up $21.9 (+1.33%) an ounce to $1670.80 and the DG spot price is $1669.10.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.34% Friday to 941.13 metric tons, Reuters reported. 

Speculators cut net long positions in Comex gold by 3,651 contracts in the week ended Oct. 11 to 1,290, according to the weekly Commitments of Traders report released Friday by the U.S. Commodity Futures Trading Commission.

Investors are now betting there’s a 96.2% chance of a 75-basis-point rate increase at the next meeting of Fed policymakers in early November, with the remaining 3.8% projecting a 50-basis-point hike, according to the CME FedWatch Tool. A month ago, just 59.7% of investors anticipated a 75-basis-point increase, with 30.7% predicting a 50-basis-point hike and the rest a 100-basis-point increase. 

The Fed has raised interest rates by 300 basis points so far this year, with 75 basis points increases each in June, July, and September. There are two more meetings left this calendar year.

Martins Kazaks, a European Central Bank official, told Bloomberg in an interview that the ECB should raise rates by 75 basis points this month, by 50 to 75 basis points in December and continue hikes into 2023 to combat soaring costs of goods and services.

The consumer price index surged 8.2% in September from a year earlier, according to a report last week. So-called core CPI, the index excluding food and energy costs, increased 6.6% from a year earlier to the highest level since 1982, while it climbed 0.6% for a second month.

U.S. consumer sentiment edged up to a six-month high in October, a report Friday showed, as supply-chain constraints eased, offsetting concerns about inflation and Fed interest rate increases. But U.S. retail sales were flat in September, a separate report showed. 

In economic news this week, September industrial production data is due out Tuesday, followed Wednesday by housing starts data and the Beige Book – the report on the state of the economy from the Fed’s 12 regional banks. 

Front-month silver futures fell 11% last week to settle at $18.07 an ounce on Comex, as the December contract decreased 4.5% Friday. Silver advanced 6.5% in September and fell 6.5% in the third quarter. It’s down 23% this year. The December contract is currently up $0.709 (+3.92%) an ounce to $18.780 and the DG spot price is $18.96.

Spot palladium dropped 8.8% last week to $2,023.50 an ounce after it tumbled 5.5% Friday. Palladium gained 5.9% last month and 13% in the third quarter. It’s up 5.7% in 2022. Currently, the DG spot price is up $25.20 to $2053.00.

Spot platinum lost 2.1% last week to $906.70 an ounce after retreating 0.4% Friday. Platinum rose 2.6% in September. It fell 4% in the third quarter and is down 6.8% this year. The DG spot price is currently up $23.30 an ounce to $928.20.

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