Gold steady after second monthly rally

Gold steady after second monthly rally

Gold steady after second straight monthly rally amid heightened speculation that the Federal Reserve’s interest rate increase cycle has peaked and that the central bank will either hold or cut rates going forward. The yellow metal has also set its sights on its third straight weekly gain.

The Fed’s favorite inflation report, the personal consumption expenditures price index, came in in line with expectations Thursday, adding to the thinking that the central bank is probably done with interest rate hikes and may begin cutting rates in the middle of next year. 

Investors are awaiting comments Friday from Fed Chair Jerome Powell for further direction. The key first-of-the-month U.S. manufacturing report from the Institute for Supply Management will also be released Friday, providing a snapshot on the economy.  

Front-month gold futures fell 0.5% Thursday to settle at $2,057.20 an ounce on Comex, though the February contract has increased 1.7% so far this week. Bullion rose 3.2% last month after gaining 6.9% in October and falling 5.1% in September. The metal is up 13% in 2023. The February contract is currently down slightly, $1.7 (-0.08%) an ounce, to $2055.50 and the DG spot price is $2038.00..

Gold rose last month even as the S&P 500 Index posted the best November in almost a century – also on speculation that the Fed will soon stop its rate hikes. Higher interest rates make other assets, like gold and equities, less attractive for investors. 

The PCE index, excluding volatile food and energy prices, rose 0.2% in October and 3.5% year on year, according to data released Thursday from the Commerce Department. Both figures were in line with economists’ estimates and lower than September’s numbers. Top-line PCE, including food and energy prices, was flat in October and rose 3% year on year. Personal income and spending both rose 0.2% in October. 

Meanwhile, data released Wednesday showed the U.S. economy grew at a 5.2% rate in the third quarter, stronger than analysts expected. But the Beige Book report of the economic conditions in the Fed’s 12 regions showed an economic slowdown in recent weeks. 

The Fed has boosted interest rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level. The Fed kept interest rates unchanged at 5.25% to 5.50% in November. The CME FedWatch Tool shows that 99.2% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged Dec. 13, while .8% are expecting a 25 basis point decrease. Almost half of the investors tracked by the tool are betting on a rate cut in March, with even more betting on one in May. 

Front-month silver futures increased 0.9% Thursday to settle at $25.66 an ounce on Comex, and the March contract has rallied 3.9% so far this week. Silver advanced 12% in November after increasing 2.2% in October and decreasing 9.5% in September. It’s up 6.7% in 2023. The March contract is currently down $0.100 (-0.39%) an ounce to $25.560 and the DG spot price is $25.25.

Spot palladium fell 1.2% Thursday to $1,029.00 an ounce and has dropped 5% so far this week. Palladium lost 9.5% last month after dropping 10% in October and rising 3% in September. Palladium has plummeted 43% so far this year. The current DG spot price is down $11.90 an ounce to $1916.50.

Spot platinum retreated 0.6% Thursday to $936.10 an ounce and is down 0.3% so far this week. Platinum fell 0.7% in November after gaining 3.5% in October and declining 6.6% in September. Platinum is down 13% in 2023. The DG spot price is currently down $5.40 an ounce to $931.00.

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