Gold slips off Tuesday’s rally as investors brace for inflation data coming later this week with the DG spot price drifting from $2360 an ounce early in the trading day to $2343. Tuesday’s rally ran out of steam on a firming dollar and Treasury yields.
Investors are awaiting the release of the Federal Reserve’s favorite inflation measure, the personal consumption expenditures price index, on Friday with April data for indications on when the central bank might be ready to cut interest rates. The release Wednesday of the Fed’s Beige Book report on the economic conditions in each of the country’s 12 regions is also likely to provide some guidance.
High interest rates are typically bearish for gold, making them a less attractive alternate investment than some other assets. The Fed was widely expected to begin a series of interest rate cuts in the first part of this year, but the timeline for the rate reductions has been pushed back by persistently high inflation. Most investors currently don’t expect a rate cut until November.
Minneapolis Fed President Neel Kashkari told CNBC Tuesday that he wants to see “many more months” of positive inflation data before cutting rates – and that the Fed could even potentially raise rates again if inflation doesn’t drop further. The Fed has a 2% target for inflation. 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.
August gold futures rose 1% Tuesday to settle at $2,379.30 an ounce on Comex after the most-active contract tumbled 3.4% last week. U.S. financial markets were closed Monday for the Memorial Day holiday. Gold traded electronically without a settlement. Bullion has gained 3.3% 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 August contract is currently down $13.10 (-0.55%) an ounce to $2366.20 and the DG spot price is $2344.90.
New York Fed President John Willians and Atlanta Fed President Raphael Bostic are scheduled to speak Wednesday. Minutes of the last Fed policy meeting, released last week, showed that it would probably take longer than the members had previously thought to start interest rate cuts.
Consumer confidence rose for the first time in four months in May, data released Tuesday by the Conference Board showed. Separate data out Tuesday showed U.S. home prices reached a record high in March.
About 99.1% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 0.9% expect a 25 basis point increase. Almost 90% of investors also expect the Fed to hold rates at current levels in July and more than half see rates staying unchanged in September. Most investors don’t expect a rate cut until November. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting.
July silver futures rose 5.4% Tuesday to settle at $32.14 an ounce on Comex. The front-month contract lost 2.4% last week. Silver is up 21% 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 $0.142 (-0.44%) an ounce to $31.995 and the DG spot price is currently $31.89.
Spot palladium gained 1.4% Tuesday to $990.00 an ounce and decreased 3.9% last week. Palladium is up 2.4% 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 $25.90 an ounce to $960.00.
Spot platinum increased 3% Tuesday to $1,067.60 an ounce. It fell 4.9% last week. Platinum is up 13% 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 down $17.60 an ounce to $1048.20.
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