Gold Steady ahead of Fed decision

Gold Steady ahead of Fed decision

Gold steady steady overnight ahead of this afternoon’s Fed decision. The yellow metal did get a small boost this morning from a surprise drop in U.S. retail sales. Investors now look toward today’s monetary policy announcement from the U.S. Federal Reserve, amid speculation about how aggressive the central bank will be in efforts to combat 40-year highs in inflation and stave off a potential recession.

Retail sales dropped in May as U.S. consumers’ purchasing appetite waned on surging inflation. The Commerce Department reported Wednesday that Advance retail and food service spending fell 0.3% for the month, economist had forecast a 0.1% gain. Excluding autos, sales were up 0.5%, which fell short of expectations for a 0.8% increase.

Some projects indicated that the Fed could announce its biggest interest-rate hike since 1994 as Fed signals from a few weeks ago about a half percentage point increase at both today’s meeting and one in July gave way to anticipation that the rate hike could be higher. The forecasts accelerated after last week’s report of the consumer price index, with an increasing number of investors now expecting a 75-basis-point increase, according to the CME’s FedWatch Tool.

The rate announcement, due out Wednesday afternoon, follows a half a percentage point increase in May, in the second rate hike of 2022 and the largest in 22 years. Rate increases are typically considered bearish for gold. But the metal had some support early Wednesday from weaker U.S. Treasury yields and uncertainty around the pandemic and the war in Ukraine.

August gold futures fell 1% Tuesday to settle at $1,813.50 an ounce on Comex, and the most-active contract slipped 3.3% in the first two days of the week. Gold dropped 3.3% in May, its worst month since September. It retreated 3.5% in 2021. The August contract is currently up $16.90 (+0.93%) an ounce to $1,830.40 and the DG spot price is $1,829.00

Last week’s CPI report showed the highest U.S. inflation since 1981 in May and prompted more projections that the Fed will have to escalate its rate increases from places like Barclays Plc and Jefferies LLC. The Fed’s favorite inflation measure – the personal consumption price index — slowed to 6.3% in April from a 40-year high of 6.6% in March, data released at the end of May showed. It was the first decline in the personal consumption index in a year and a half.

Front-month silver futures decreased 1.4% Tuesday to settle at $20.95 an ounce on Comex and is down 4.5% so far this week. Silver dropped 6.1% in May after losing 8.2% in April. It retreated 12% in 2021. Silver prices are tied to industrial demand. The July contract is up currently by $0.611 (+2.92%) an ounce to $21.565 and the DG spot price is $21.67.

Spot palladium rose 0.3% Tuesday to $1,842.50 an ounce, but is down 5.6% in the first two days of this week. The metal lost 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. The DG spot price is currently up $49.30 an ounce to $1,879.50.

Spot platinum fell 1.9% Tuesday to $927.70 an ounce, and it tumbled 5.7% so far this week. It gained 2.3% last month and lost 9.4% last year. The current DG spot price is up $24.80 an ounce to $950.50.


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