Gold slips as investors await Fed meeting

Gold slips as investors await Fed meeting

Gold slips early Monday as the dollar strengthened and investors await direction from Wednesday’s Fed meeting.

The central bank is widely expected to pause its series of interest rate increases, leaving the federal funds rate at 5.00% to 5.25%. Holding rates unchanged is considered bullish or neutral for gold. Interest rate hikes are bearish, making the yellow metal less attractive to investors. 

Investors are also anticipating Tuesday’s release of the U.S. consumer price index for May for the latest signals on inflation and the state of the economy. Fed policymakers have indicated that they closely follow both labor market data and inflation when determining monetary policy. 

August gold futures rose 0.4% last week to settle at $1,977.20 an ounce on Comex, though the front-month contract lost $1.40 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 current August contract is down $12.3 (-0.62%) an ounce to $1964.90 and the DG spot price is $1952.70.

About 74.7% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep interest rates unchanged at the next meeting June 14, while 25.3% expect the central bank to raise rates by another 25 basis points. But the outlook for the July and September Fed policy meetings. Most investors are betting on a rate hike of either 25 or 50 basis points at those two meetings. 

The Fed has raised rates at its last 10 meetings in an effort to curb inflation. U.S. inflation measured by the personal consumption expenditures price index, the Fed’s favorite inflation measure, bounced higher in April. 

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.

In addition to the Fed meeting, central banks in Europe, China and Japan are set to announce key rate decisions this week. The Bank of Canada and Reserve Bank of Australia announced unexpected hikes last week. The European Central Bank is expected to raise its benchmark rate Thursday, while the Bank of Japan is expected to hold steady on Friday. 

July silver futures rallied 2.8% last week to settle at $24.41 an ounce on Comex after the front-month contract climbed 0.3% 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 $0.375 (-1.54%) an ounce to $24.035 and the DG spot price is $24.02.

Spot palladium decreased 5.7% last week to $1,343.50 an ounce after retreating 1.8% 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 up $25.70 an ounce to $1355.50.

Spot platinum rose 1.1% last week to $1,019.50 an ounce after edging up 80 cents 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 $12.10 an ounce to $1004.70.

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