Gold steady ahead of Wednesday’s Fed meeting. The yellow was little changed early Monday as investors awaited the Federal Reserve’s interest rate decision for further direction.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, cooled further in December, data released Friday showed, boosting speculation that a smaller rate hike could be appropriate.
The core PCE index, which excludes food and energy costs, rose 4.4% last month from a year earlier, while the overall PCE increased 5% from the year before, data released by the Commerce Department showed. Both were the slowest pace since late 2021 and may indicate that the Fed could ease up on the size of its series of rate increases to curb inflation. The Fed raised rates by 50 basis points in December and by 75 basis points each in June, July, September, and November.
Front-month gold futures rose 70 cents last week to settle at $1,945.60 an ounce on Comex, though the April contract slipped $1.10 Friday. Bullion is up 6.5% this month after gaining 3.8% in December and increasing 7.3% in November. The December increase was the first two-month rally since March. The metal fell $2.40 in 2022. The April contract is currently down $4.0 (-0.21%) an ounce to $1941.60 and the DG spot price is $1926.70.
Almost all the investors tracked by the CME FedWatch Tool are now betting that the Fed will boost interest rates by just 25 basis points this week, compared with 59.7% a month ago. The tool shows 98.9% of investors anticipating a 25-basis-point hike, with the remaining 1.1% expecting the Fed to leave rates unchanged. Rates increased by 425 basis points in 2022 from 4.25% to 4.5%, the highest level in 15 years.
Smaller rate hikes are seen as bullish for gold, while smaller ones are bearish. That’s because higher rates diminish gold’s attractiveness as a haven asset. Investors will be closely listening to Fed Chairman Jerome Powell’s comments on the state of the economy after the meeting.
The European Central Bank and the Bank of England are also scheduled to hold policy meetings this week.
In other economic news, the University of Michigan’s consumer sentiment index ticked higher for a second month in January, indicating that consumers are feeling better about the economic outlook. According to data released Friday, the measure reached 64.9 this month, up from 59.7 in December. The January figure was also up from a preliminary reading of 64.6 earlier this month.
In addition to the Fed, investors will be closely watching for the release of the first-of-the-month manufacturing reports from the U.S. and other major economies Wednesday. Key job reports are also due out at the end of the week, beginning with the January ADP employment report Wednesday, followed by weekly initial jobless claims Thursday, and culminating with the monthly U.S. jobs report for January from the Labor Department on Friday.
Front-month silver futures decreased 1.3% last week to settle at $23.62 an ounce on Comex after the March contract fell 1.7% Friday. Silver is down 1.7% this month after rising 10% in December and increasing 14% in November, its biggest monthly gain since December 2020. It advanced 3% in 2022. The March contract is currently up $0.188 (+0.80%) an ounce to $23.810 and the DG spot price is $23.67.
Spot palladium retreated 6.6% last week to $1,629.50 an ounce after dropping 3.5% Friday. Palladium is down 9.8% this month after tumbling 4% in December and gaining 0.3% in November. It lost 5.7% in 2022. Currently, the DG spot price is up $6.30 an ounce to $1631.00.
Spot platinum fell 3.1% last week to $1,017.70 an ounce after losing 0.8% Friday. Platinum has retreated 4.9% in January after increasing 3.4% last month and rising 11% in November, its best month since February 2021. It surged 10% in 2022. The DG spot price is currently down $1.10 an ounce to $1015.70.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.