Gold slips following last week’s rally

Gold slips following last week’s rally

Gold slips early Monday amid profit taking following last week’s rally and anticipation that the Federal Reserve will keep interest rates high for a few more months.

Investors are awaiting further direction from the release of the Fed’s favorite inflation measure, the personal consumption expenditures price index, which is due out on Thursday with January figures. The U.S. consumer price index and producer price index came in hotter than expected for January in data released earlier this month. 

Federal Reserve Bank of New York President John Williams said in an interview published Friday by Axios that it will be “appropriate” to cut interest rates “at some point,” probably later this year, but policymakers still want to see inflation data continue to move toward the central bank’s 2% goal. 

Front-month gold futures rose 1.3% last week to settle at $2,049.40 an ounce on Comex after the most-active April contract gained 0.9% Friday. Bullion is down 0.9% so far this month after declining 0.2% in January and gaining 0.7% in December. The metal rose 13% in 2023. The April contract is currently down $13.70 (-0.67%) an ounce to $2035.70 and the DG spot price is $2028.40.

Recent strong economic data has given the Fed more wiggle room to keep rates high, but high interest rates are typically considered bearish for gold. 

The minutes of the Fed’s last policy meeting, which came out last week, showed that policymakers are cautious about lowering rates and worried about the “risks of moving too quickly.” 

A series of Fed officials are scheduled to speak this week and may provide further guidance. They include Atlanta Fed President Raphael Bostic, Boston Fed President Susan Collins and the New York Fed’s Williams on Wednesday; Chicago Fed President Austan Goolsbee, Bostic and Cleveland Fed President Loretta Mester on Thursday; and Bostic and San Francisco Fed President Mary Daly on Friday. Finance ministers and central bank chiefs from the G-20 countries are also scheduled to meet Wednesday. 

About 97.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged next month, while 2.5% expect a 25 basis point cut. A majority of investors tracked by the tool now also anticipate the Fed will hold rates steady at the following policy meeting in May, too. Most are now looking to June for a rate cut.

The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% earlier this month. 

In other economic news this week, U.S. reports on consumer confidence and durable goods are due out Tuesday, followed by U.S. GDP data Wednesday, initial jobless claims Thursday and ISM manufacturing data Friday. 

Front-month silver futures, which rolled to May from March last week, fell 1.2% last week to settle at $23.19 an ounce on Comex. The May contract rose 0.8% Friday. Silver is up 2 cents so far this month after falling 3.8% in January and dropping 6.1% in December. It ticked up 0.2% in 2023. The May contract is currently down $0.469 (-2.02%) an ounce to $22.720 and the DG spot price is $22.60.

Spot palladium gained 4.1% last week to $999.50 an ounce after rising 2.1% Friday. Palladium is down 50 cents so far this month after tumbling 11% in January and advancing 8.6% in December. Palladium plummeted 38% last year. Currently, the DG spot price is down $27.50 an ounce to $971.00.

Spot platinum lost 0.2% last week to $910.40 an ounce, though it rose 0.3% Friday. Platinum is down 2.2% so far this month after falling 8% in January and rising 8.1% in December. Platinum dropped 6.8% in 2023. The current DG spot price is down $23.40 an ounce to $887.20.

Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.