Gold steady ahead of Fed decision on hikes

Gold steady ahead of Fed decision on hikes

Gold steady early Monday ahead of Fed decision, as investors expect a pause in interest rate hikes.

Investors will likely take further direction from the economic outlook provided in the statement accompanying the central bank’s monetary policy decision. The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to curb inflation. A halt or pause in interest rates would be considered bullish for gold, which comes under pressure when the Fed raises rates. 

Front-month gold futures rose 0.2% last week to settle at $1,946.20 an ounce on Comex after the December contract gained 0.7% Friday. Bullion dropped 2.2% in August after rising 4.1% in July and losing 2.7% in June. The metal is up 6.6% in 2023. The December contract is currently up $1.00 (+0.05%) an ounce to $1947.20 and the DG spot price is $1925.40.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.1% Friday to 880.27 metric tons, Reuters reported. Meanwhile, gold speculators cut net long positions by 16,544 contracts in the week ended Sept. 12 to 49,796, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report

U.S. industrial production in August beat economists’ estimates, according to data from the Federal Reserve Friday. Consumer sentiment slipped for a second month in September, but the economic outlook picked up, according to a separate report Friday based on University of Michigan data. The reports came after two key inflation gauges – the U.S. consumer price index and the producer price index – indicated last week that costs of goods and services are still rising and added to speculation that the Fed is likely to keep rates high for some time.  

About 99% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged Wednesday at 5.25% to 5.50%. Just 1% expect it to raise rates another 25 basis points. Most still expect the Fed to hold at the remainder of policymakers’ meetings this year – by a margin of 69.8% for November and 62.4% for December.

The Bank of England is expected to raise interest rates again this week, and the Bank of Japan is also set to issue a monetary policy decision Friday. 

Front-month silver futures increased 0.9% last week to settle at $23.39 an ounce on Comex, after the December contract advanced 1.7% Friday. Silver slipped 0.6% in August after gaining 8.5% in July and dropping 2.4% in June. It’s down 2.7% in 2023. The December contract is currently down $0.051 (-0.22%) an ounce to $23.335 and the DG spot price is $23.06.

Spot palladium rallied 4.3% last week to $1,266.00 an ounce after ticking up 50 cents Friday. Palladium slid 5.3% last month after rising 3.6% in July and falling 9.5% in June. Palladium has plummeted 30% so far this year. The DG spot price is currently down $8.20 an ounce to $1257.50.

Spot platinum gained 3.9% last week to $935.10 an ounce and rose 2.2% Friday. Platinum advanced 1.7% in August after gaining 5.2% in July and falling 9.3% in June. Platinum is down 13% in 2023. Currently, the DG spot price is up $7.00 an ounce to $940.60.

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