Gold slips on profit-taking early Friday, but still headed for a weekly rally amid heightened expectations of an interest rate cut next week by the Federal Reserve.
Two inflation reports that came out this week solidified expectations of the year’s third rate cut. Interest rate reductions are considered bullish for gold because they make the yellow metal a more attractive alternate investment to higher-risk assets. Gold also rallied on haven demand from geopolitical risk and reports that China, the world’s top gold consumer, was resuming purchases of the yellow metal.
The yellow metal’s rally may slow down next year amid inflation and possible trade wars and interest rate outlooks that would affect economic growth, the World Gold Council said in its 2025 outlook, released Thursday.
Front-month gold futures tumbled 1.7% Thursday to settle at $2,709.40 an ounce on Comex, though the most-active February contract rallied 1.9% in the first four days of the week. Bullion dropped 2.5% last month after rising 3.4% in October and gaining 5.2% in September. The metal is up 31% in 2024. The February contract is currently down $28.90 (-1.07%) an ounce to $2680.50 and the DG spot price is $2661.50.
U.S. consumer price index and producer price index data for November came in in line with economists’ expectations this week, likely keeping the Fed on track to implement its long-expected rate reductions.
The CPI increased 2.7% year on year, up from an annual 2.6% gain in October. The index was up 0.3% month on month, compared with 0.2% in October. Excluding volatile food and energy prices, the core CPI climbed 3.3% year on year and 0.3% month on month. Wholesale prices measured by the PPI came in slightly higher than expected month on month for November, but core PPI met the forecast.
More than 96% of the investors tracked by the CME FedWatch Tool are now betting that the Fed will cut rates by another 25 basis points next week, ending the year at 4.25% to 4.50%. The rest expect the central bank to keep rates unchanged this month.
Fed policymakers voted unanimously at November’s meeting to cut interest rates by 25 basis points to 4.50% to 4.75%. The central bank also cut rates in September. Before those reductions, the Fed had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022. The Fed began raising rates during the pandemic to combat surging inflation.
Separately, the European Central Bank cut rates for the fourth time this year on Thursday.
Front-month silver futures tumbled 4.1% Thursday to $31.62 an ounce on Comex, though the most-active March contract edged up 0.1% in the first four days of the week. Silver fell 5.2% in November after advancing 4.3% in October and rallying 7.9% in September. It’s up 31% in 2024. The March contract is currently down $0.614 (-1.94%) an ounce to $31.005 and the DG spot price is $30.51.
Spot palladium slid 1.8% Thursday to $988.00 an ounce, though it’s up 1.7% so far this week. Palladium decreased 12% last month after increasing 11% in October and gaining 3.2% in September. Palladium is down 12% this year. Currently, the DG spot price is down $21.50 an ounce to $970.00.
Spot platinum lost 0.8% Thursday to $939.10 an ounce, though it gained 0.6% in the first four days of the week. Platinum declined 4.2% in November after rising 1.5% in October and increasing 5.6% in September. Platinum is down 5.8% this year. The DG spot price is currently down $10.50 an ounce to $932.20.
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