Gold slips but remained just below record

Gold slips but remained just below record

Gold slips but remained just below record highs early Wednesday as investors awaited the release of the minutes of the last meeting of Federal Reserve policymakers for further direction on monetary policy.

Persistently high inflation has kept the Fed from cutting interest rates so far this year, and most investors don’t currently expect a rate cut to happen before September. But the minutes are expected to shed new light on policymakers’ thinking about that timetable. High interest rates are typically bearish for gold, making them a less attractive alternate investment than some other assets, but a rate cut or a pending rate cut would be bullish for the precious metal. 

Gold surged to a record high on Monday, extending last week’s gains, amid increased optimism about an eventual rate cut and haven demand connected with geopolitical uncertainty in the Middle East. Silver has also soared to the highest level in a decade this month after breaking through a key resistance level. Silver is also supported by projected deficits in the metal in the fourth quarter and the monetary policy signals.

Front-month gold futures fell 0.5% Tuesday to settle at $2,449.10 an ounce on Comex, as the most-active August contract surged 1.3% in the first two days of the week. Bullion has gained 6.4% 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 down $11.00 (-0.45%) an ounce to $2414.90 and the DG spot price is $2408.30.

July silver futures dropped 1.1% Tuesday to settle at $32.08 an ounce on Comex, but the front-month contract is up 2.6% so far this week. Silver is up 20% 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 down $0.038 (-0.12%) an ounce to $32.040 and the DG spot price is $31.81.

Fed Governor Christopher Waller said Tuesday that the central bank could cut rates at the “end of this year” if inflation data continues to cooperate. In remarks at the Peterson Institute for International Economics, he said that the Fed needs to see “several more” good inflation reports to start cutting. 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.

“If the data were to continue softening throughout the next three to five months, you can even think about doing it at the end of this year,” he told CNBC in separate remarks Tuesday. “If we get enough data going the right way, then we can think about cutting rates later this year, beginning of next year.”

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. 

In other upcoming economic news, U.S. initial jobless claim come out Thursday, and U.S. durable goods orders and University of Michigan consumer sentiment data come out Friday. 

About 98.4% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 1.6% expect a 25 basis point hike. More than 80% 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. 

Spot palladium slipped $1.50 Tuesday to $1,039.00 an ounce but increased 2.3% so far this week. Palladium is up 7.5% in May after declining 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. Currently, the DG spot price is down $16.80 an ounce to $1021.00.

Spot platinum rose 30 cents Tuesday to $1,060.00 an ounce but is down 2.7% so far this week. Platinum is up 12% 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 $1.30 an ounce to $1059.20.

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