Gold slips on heightened Fed speculation

Gold slips on heightened Fed speculation

Gold slips on heightened Fed speculation, drifting lower early Wednesday as the dollar edged higher and investors eyed an interest rate increase in May.

St. Louis Fed President James Bullard told Reuters that the Fed should keep raising rates after recent data showed inflation remained persistent amid continued economic strength. He also pooh-poohed the idea that the economy was on the brink of recession. Higher interest rates are typically bearish for gold, because they make the yellow metal less attractive as an alternate investment. 

Atlanta Fed President Raphael Bostic separately told CNBC that “one more move should be enough for us” on interest rates. His comments added to speculation that the central bank may pause after a 25-basis-point interest rate hike in May. 

June gold futures rose 0.6% Tuesday to settle at $2,019.70 an ounce on Comex, and the front-month contract is up 0.2% so far this week. Bullion gained 8.1% last month after decreasing 5.6% in February, its worst performance since June 2021. Gold increased 8.8% in the first quarter. The metal fell $2.40 in 2022. The June contract is currently down $17.70 (-0.88%) an ounce to $2002.00 and the DG spot price is $1993.00.

About 82.8% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at the central bank’s next policy meeting in May, while just 17.2% anticipate the central bank will leave rates unchanged. Fed policymakers have said they track both inflation and labor market statistics when determining monetary policy. 

The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. The federal funds rate is currently at 4.75% to 5.00%. 

Investors will be closely watching upcoming economic news, including the release of the Fed’s Beige Book on Wednesday, the economic reports from each of the 12 regional banks. New York Fed President John Williams is also scheduled to speak Wednesday. Data due out Thursday include weekly initial jobless claims, March existing home sales, and the March index of leading economic indicators, along with a series of Fed speeches. 

Silver May futures gained 0.7% Tuesday to settle at $25.26 an ounce on Comex, though the metal fell 0.8% in the first two days of the week. Silver increased 15% in March after retreating 12% in February. It edged up 0.5% in the first quarter. It rose 3% in 2022. The May contract is currently down $0.008 (-0.03%) an ounce to $25.255 and the DG spot price is $25.31.

Spot palladium increased 5.3% Tuesday to $1,662.50 an ounce and is up 10% so far this week. Palladium rose 3.7% in March after plummeting 14% in February. It fell 17% last quarter. Palladium lost 5.7% in 2022.  Currently, the DG spot price is down $35.50 an ounce to $1627.50.

Spot platinum gained 3% Tuesday to $1,089.50 an ounce and added 4% in the first two days of the week. Platinum increased 3.7% last month after falling 5.9% in February. It dropped 6.6% in the first quarter. Platinum surged 10% in 2022. The DG spot price is currently down $2.10 an ounce to $1089.30.

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