Gold slips on retail sales report

Gold slips on retail sales report

Gold slips Wednesday on this morning’s retail sales report, extending the previous day’s losses, as the dollar strengthened on hawkish comments about monetary policy from a Federal Reserve official.

Holiday shopping better than expected in December, closing out a strong 2023, per the Commerce Department. Retail sales increased 0.6% for the month, buoyed by a pickup in clothing and accessory stores as well as online nonstore businesses. The results beat the 0.4% Dow Jones estimate. This solid economic news underscores the Fed’s recent talk of “not rushing” to cut rates. DG spot gold dropped

Fed Governor Christopher Waller said Tuesday that the central bank can take its time when it comes to relaxing monetary policy. Many investors are reading the comment as a signal that the central bank, something some investors are reading as a signal that the Fed won’t be as aggressive as they’d previously anticipated in interest rate cuts. High interest rates are typically bearish for gold, but rate cuts would be bullish.

Investors are awaiting further direction Wednesday from reports on U.S. retail sales and industrial production for December, along with the Fed’s Beige Book report from the 12 regional banks on the state of the economy.

Front-month gold futures fell 1% Tuesday to settle at $2,030.20 an ounce on Comex. There was no settlement Monday because of the Martin Luther King Jr. Day holiday in the U.S. The February contract rose $1.80 last week. 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 $14.40 (-0.71%) an ounce to $2015.80 and the DG spot price is $2011.10.

The yellow metal came under pressure as the dollar rallied to more than a one-month high on Waller’s comments. A stronger dollar is typically bearish for gold, making the yellow metal a less attractive investment. 

“This cycle … I see no reason to move as quickly or cut as rapidly as in the past,” Waller said Tuesday. “When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully.”

The CME FedWatch Tool shows that 97.4% 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 2.6% are expecting a 25 basis point cut. But that changes in March, with the central bank widely expected to cut, with another reduction expected in May. 

The Fed has raised interest rates by 5.25 percentage points since March 2022 to curb inflation. The Fed closely watches economic reports, particularly on inflation and labor market conditions, when determining monetary policy.

In upcoming U.S. economic news, initial jobless claims and housing starts are due out Thursday, followed by preliminary consumer sentiment for January on Friday. 

Front-month silver futures slid 1% Tuesday to $23.09 an ounce on Comex. The March contract rose 1.4 cent last week. 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 $0.278 (-1.20%) an ounce to $22.815 and the DG spot price is $22.70.

Spot palladium dropped 3.7% Tuesday to $952.50, adding to last week’s 5.3% loss. Palladium advanced 8.6% in December after losing 9.5% in November and dropping 10% in October. Palladium plummeted 38% last year. Currently, the DG spot price is down $18.60 an ounce to $929.50.

Spot platinum fell 1.8% Tuesday to $903.80 an ounce. It lost 5.2% last week. 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 $10.60 an ounce to $893.80.

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