Gold slips in Friday morning trading, but still headed for its third consecutive weekly rise, as investors firmed bets that the Federal Reserve will resume interest rate cuts this year.
The yellow metal surged to its highest level since Dec. 12 after a series of economic reports pressured Treasury yields and comments by Fed Governor Christopher Waller made gold a more attractive alternate investment. Waller told CNBC on Thursday that interest rate cuts could come multiple times in 2025 if inflation eases – which he expects.
The U.S. consumer price index for December came out Wednesday and showed that core inflation rose less than forecast. The data came out a day after the U.S. producer price index indicated that wholesale prices rose less than expected in December as well. Slower-than-expected inflation growth is bullish for gold because it makes Fed rate cuts more likely.
Front-month gold futures rose 1.2% Thursday to settle at $2,750.90 an ounce on Comex, and the most-active February contract fell 1.3% in the first four days of the week. Bullion dropped 1.5% in December after losing 2.5% in November and rising 3.4% in October. The metal gained 27% in 2024, its biggest annual gain since 2010. Gold’s 2024 rally was spurred by the Fed, the economy and global central bank buying cycles. The February contract is currently down $13.30 (-0.48%) an ounce to $2737.60 and the DG spot price is $2709.60.
Most U.S. financial markets will be closed Monday for the Martin Luther King Jr. Day holiday.
Core CPI, excluding volatile food and energy prices, eased in December on a month-on-month basis, the first such move since July. On an annual basis, prices rose 3.2%, down from 3.3%, where it had been stuck for four months. The Fed closely watches both inflation and labor market reports when setting interest rates.
Separately, the Beige Book, the Fed’s report on economic conditions in each of its 12 districts, showed Wednesday that economic activity increased “slightly to moderately” across the country late last year.
Both the inflation and economic reports provide investors with indicators on the central bank’s upcoming monetary policy decisions.
“As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in,” Waller said Thursday on CNBC.
Most investors aren’t pricing in a rate cut until June, according to investors tracked by the CME FedWatch Tool. Fed policymakers are almost unanimously expected to keep interest rates unchanged at the end of this month, with less than 3% are betting on another 25 basis point cut.
The Fed reduced its benchmark interest in September, November and December. It’s now at 4.25% to 4.50%. Previously, the central bank had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to combat inflation.
Front-month silver futures gained 0.6% Thursday to $31.73 an ounce on Comex, and the most-active March contract increased 1.3% in the first four days of the week. Silver dropped 6% in December after falling 5.1% in November and advancing 4.3% in October. It gained 21% in 2024. The March contract is currently down $0.760 (-2.40%) an ounce to $30.965 and the DG spot price is $30.26.
Spot palladium lost 2.1% Thursday to $952.00 an ounce. It decreased 0.7% so far this week. Palladium fell 6.7% in December after sliding 12% in November and increasing 11% in October. Palladium dropped 17% last year. Currently, the DG spot price is up $2.10 an ounce to $962.00.
Spot platinum slipped 0.2% Thursday to $942.70 an ounce and is down 2.7% this week. Platinum lost 4.6% last month after declining 4.2% in November and rising 1.5% in October. Platinum slid 8.4% in 2024. The DG spot price is currently up $6.60 an ounce to $953.30.
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