Gold slips early Monday on investors pushing out the anticipated rate cut timeline of expected interest rate increases from the Federal Reserve.
Most investors are now expecting rate cuts to begin in June or July – not at the meeting this week or at the one in May. Still, the statement released by policymakers at the end of the meeting on Wednesday is likely to be closely watched for further direction.
The Fed closely tracks both inflation and labor market data when determining monetary policy.
Continued high interest rates would be considered bearish for the yellow metal, making it a less attractive asset for investors.
Strength in the dollar has pressured gold since two inflation reports came in hotter than expected last week. The core U.S. consumer price index, the cost of goods excluding volatile food and energy prices, came in above forecasts for the second consecutive month, while the producer price index, which measures wholesale prices, accelerated at a faster-than-expected pace of 0.6%, according to data released by the U.S. Bureau of Labor Statistics.
Consumer sentiment for early March mostly held steady, according to University of Michigan data out Friday, amid caution around the upcoming U.S. presidential election.
Front-month gold futures fell 1.1% last week to settle at $2,161.50 an ounce on Comex after the most-active April contract slid 0.3% Friday. Bullion dropped 0.6% in February after declining 0.2% in January and gaining 0.7% in December. The metal rose 13% in 2023. The April contract is currently down $1.50 (-0.07%) an ounce to $2160.00 and the DG spot price is $2158.30.
Last week’s was the first weekly loss in four.
About 99% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged Wednesday, while 1% expect a 25 basis point cut. More than 90% of investors tracked by the tool also anticipate the Fed will hold rates steady at the following policy meeting in May. Most are looking to June or even July 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% at its last meeting.
In remarks a few weeks ago – before the latest inflation data – Fed Chairman Jerome Powell indicated that the central bank was close to a decision to cut, though by how much was in question.
The Bank of Japan is scheduled to announce a rate decision Tuesday, and about 90% of BOJ watchers expect the central bank to end its negative rate policy. The Bank of England has a rate decision Thursday.
Front-month silver futures rose 3.4% last week to settle at $25.38 an ounce on Comex after the May contract rallied 1.3% Friday. Silver lost 1.2% in February after falling 3.8% in January and dropping 6.1% in December. It ticked up 0.2% in 2023. The May contract is currently up $0.064 (+0.25%) an ounce to $25.445 and the DG spot price is $25.26.
Spot palladium increased 6.7% last week to $1,096.00 an ounce and gained 1.3% Friday. Palladium fell 4.6% in February after tumbling 11% in January and advancing 8.6% in December. Palladium plummeted 38% last year. The current DG spot price is down $19.80 an ounce to $1072.50.
Spot platinum advanced 3.3% last week to $946.40 an ounce after increasing 1% Friday. Platinum decreased 4.9% in February after falling 8% in January and rising 8.1% in December. Platinum dropped 6.8% in 2023. The DG spot price is currently down $19.20 an ounce to $926.30.
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