Gold slips on rate speculation 

Gold slips on rate speculation

Gold slips early Monday on rate speculation, extending last week’s losses, as investors reconsidered the timeline of widely expected Federal Reserve interest rate cuts.

The markets were awaiting a key U.S. inflation report for December, due out Tuesday, for further direction. Friday, the closely watched U.S. employment report for December beat analysts’ expectations, indicating that the labor market remains resilient amid higher rates. The Fed closely watches both inflation and labor market data when determining monetary policy. 

Minutes of the Fed’s December meeting, which came out last week, showed that central bank officials expect rates to stay high for some time. Higher interest rates are typically bearish for gold, making the yellow metal less attractive as an alternate investment. Conversely, rate cuts are seen as bullish for gold. 

Front-month gold futures fell 1.1% last week to settle at $2,049.80 an ounce on Comex, though the February contract slipped just 20 cents Friday. Bullion gained 0.7% last month after rising 3.2% in November and increasing 6.9% in October. The metal rose 13% in 2023. The February contract is currently down $24.00 (-1.17%) an ounce to $2025.80 and the DG spot price is $2024.70.

In physical news, the World Gold Council reported Friday that central bank gold reserves rose in November, and gross purchases heavily outweighed gross sales. China remained the world’s largest gold purchaser in 2023 but emerging markets have been driving both purchases and sales.  

In economic news, the U.S. added 216,000 jobs last month on a seasonally adjusted basis, while the unemployment rate held steady at 3.7%, according to data released Friday from the Labor Department. The figures were above both the 173,000 jobs added in November and the 175,000 that economists had forecast for December. 

The next big economic report due out is the December consumer price index, scheduled for Thursday, the next indicator on inflation. The Fed has raised interest rate cuts by 5.25 percentage points since March 2022 to curb inflation. Fed policymakers saw interest rates staying high “for some time,” according the minutes of the December meeting. 

The CME FedWatch Tool shows that 95.3% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged at 5.25% to 5.50% in January, while 4.7% are expecting a 25 basis point cut, fewer than just a day earlier. But that changes in March, with the central bank widely expected to cut, with another reduction expected in May. 

In other economic news this week, the World Economic Forum’s global risks report is due out Wednesday and U.S. wholesale inventories come out Thursday. A number of Fed officials are also scheduled to speak this week. 

Front-month silver futures dropped 3.2% last week to settle at $23.32 an ounce on Comex, though the March contract rose 0.6% Friday. Silver dropped 6.1% in December after advancing 12% in November and increasing 2.2% in October. It ticked up 0.2% in 2023. The March contract is currently down $0.120 (-0.51%) an ounce to $23.195 and the DG spot price is $23.03.

Spot palladium tumbled 6.5% last week to $1,044.00 an ounce after decreasing 0.4% Friday.  Palladium advanced 8.6% in December after losing 9.5% in November and dropping 10% in October. Palladium plummeted 38% last year. The current DG spot price is down $33.60 an ounce to $1013.50.

Spot platinum lost 2.7% last week to $970.90 an ounce, though it gained 1% Friday. Platinum rose 8.1% in December after falling 0.7% in November and gaining 3.5% in October. Platinum dropped 6.8% in 2023. The DG spot price is currently down $15.30 an ounce to $953.50.

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