Gold steady early Monday after slipping in June, its first monthly decline since February, amid uncertainty about the direction of U.S. monetary policy.
Investors are awaiting further direction from U.S. manufacturing data for June, which is due out Monday, as well as the results of the French election. Gold trading is likely to be volatile this week with light volumes as U.S. financial markets are set to close Thursday for the Independence Day holiday.
U.S. inflation grew at the slowest pace in six months in May, according to the Federal Reserve’s favorite inflation measure, which came out Friday. The data bolster the likelihood of an interest rate cut sooner rather than later. That would be bullish for gold, which typically gets a boost when interest rates drop.
August gold futures rose 0.4% last week to settle at $2,339.60 an ounce on Comex after the most-active contract gained 0.1% Friday. Bullion fell 0.3% last month after gaining 1.9% in May and 2.9% in April. The metal rose 13% in 2023. The August contract is currently up $2.00 (+0.09%) an ounce to $2341.60 and the DG spot price is $2335.10.
The inflation measure, the personal consumption expenditures price index, should the prices of “core” goods – excluding volatile food and energy prices – rose just 0.08% in May, the smallest advance since late 2020. On an annualized basis, both core and headline PCE increased 2.6% in May. The Fed has a 2% inflation target. Consumer spending also increased by 0.3% after dropping in April.
The central bank closely watches interest rates and the labor market when setting monetary policy.
The CME FedWatch Tool shows 91.2% of the investors tracked are betting that the Fed will keep rates unchanged this month. But 63.5% expect the central bank to start cutting in September. The Fed kept interest rates unchanged again in June.
The Fed has kept interest rates steady at 5.25% to 5.50% for about a year after raising them by 5.25 percentage points since March 2022 to rein in inflation. Interest rates affect gold prices because they influence the attractiveness of the yellow metal in respect to other assets.
Separately, uncertainty over a potential win by the far right in the French elections added to haven demand for gold.
September silver futures fell 1.3% last week to settle at $29.56 an ounce on Comex, though the front-month contract increased 1% Friday. Silver fell 2.9% last month after surging 14% in May and rising 7% in April. It ticked up 0.2% in 2023. The September contract is currently up $0.125 (+0.42%) an ounce to $29.685 and the DG spot price is $29.45.
Spot palladium rose 1.4% last week to $991.50 an ounce after advancing 4.8% Friday. Palladium rallied 8.1% last month after declining 5.1% in May and losing 5.9% in April. Palladium plummeted 38% last year. The current DG spot price is up $14.10 an ounce to $1004.00.
Spot platinum increased 0.3% last week to $1,003.60 an ounce after rising 0.8% Friday. Platinum fell 3.7% last month after advancing 10% in May and 3.1% in April. Platinum dropped 6.8% in 2023. The DG spot price is currently down $15.70 an ounce to $992.40.
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