Gold slips early Monday in light holiday trading, as the dollar gains amid the prospect of additional Federal Reserve interest rate hikes.
The Fed left its benchmark federal funds rate at 5.00% to 5.25% last week, in its first pause after 10 consecutive rate increases to combat inflation. But at the same time, the central bank signaled that it may not be done with rate hikes this year. Interest rate increases are bearish for gold, making the precious metal less attractive to investors than other financial assets.
Investors will be closely watching for signals on the Fed’s next moves when Fed Chairman Jerome Powell appears before Congress this week for his biannual testimony. He will appear before a House panel Wednesday and a Senate panel Thursday.
August gold futures fell 0.3% last week to settle at $1,971.20 an ounce on Comex, but the front-month contract rose 50 cents Friday. Bullion retreated 0.9% in May after increasing 0.6% in April and 8.1% in March. The metal fell $2.40 in 2022. The August contract is currently down $7.5 (-0.38%) an ounce to $1963.70 and the DG spot price is $1952.80.
Comex futures are trading without a settlement Monday, as U.S. financial markets are closed for the Juneteenth holiday.
Fed policymakers noted in a statement last week that they closely track “a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments” when determining future monetary policy. And Americans grew more optimistic about the economy and inflation last month.
Consumer sentiment rose 8% in June from May, as Americans became more upbeat about the economy amid easing inflation and the resolution of the U.S. debt ceiling standoff. Data from the University of Michigan on Friday also showed that consumer inflation expectations for the coming year eased for a second month – dropping to 3.3% in early June from 4.2% in May.
The Fed has increased rates by 25 basis points three times this year following hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022 and smaller increases in March and May of last year. The rate hikes have totaled 5 percentage points since March 2022.
About 74.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at its July monetary policy meeting, while 25.6% expect it to keep rates unchanged.
In other economic news this week, U.S. housing starts data for May come out Tuesday. Weekly initial jobless claims, existing home sales for May and the index of leading U.S. economic indicators for May all come out Thursday.
Front-month silver futures dropped 0.3% last week to settle at $24.34 an ounce on Comex, as the most active contract rolled to September from July. The September contract gained 0.7% Friday. Silver decreased 6.5% in May after gaining 4.4% in April and 15% in March. It rose 3% in 2022. The July contract is currently down $0.036 (-0.15%) an ounce to $24.090.
Spot palladium increased 7.3% last week to $1,442.00 an ounce after rallying 1.9% Friday. Palladium fell 9.3% last month after rising 2% in April and 3.7% in March. Palladium lost 5.7% in 2022. Currently, the DG spot price is down $30.20 an ounce to $1406.00.
Spot platinum dropped 2.7% last week to $991.80 an ounce after falling 0.4% Friday. Platinum retreated 7.4% in May after adding 8.5% in April and 3.7% in March. Platinum surged 10% in 2022. The DG spot price is currently down $5.80 an ounce to $985.50.
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