Gold steady ahead of inflation report as government shutdown looms

Gold steady ahead of inflation report as government shutdown looms

Gold steady ahead of inflation report early Monday as investors anticipated the release of a key inflation report Friday and and the government shutdown looms.

The yellow metal continued to be under pressure from a strong dollar, which was trading near six-month highs. Gains in the dollar make gold less attractive as an alternate investment. 

Front-month gold futures slipped 60 cents last week to settle at $1,945.60 an ounce on Comex, though the December contract gained 0.3% Friday. Bullion is down 1% in September after dropping 2.2% in August and rising 4.1% in July. The metal is up 6.5% in 2023. The December contract is currently down $2.20 (-0.11%) an ounce to $1943.40 and the DG spot price is $1925.00.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell to its lowest level since January 2020 on Friday, Reuters reported. 

Signals last week that the Federal Reserve will continue its cycle of interest rate hikes for a bit longer were also bearish for gold, but the central bank held its benchmark interest rate at 5.25% to 5.50% last week. An end to Fed rate hikes – or a pause – is considered bullish for gold.

The Fed closely watches data on inflation and the labor market in determining monetary policy. The Fed’s favorite inflation measure, the personal consumption expenditures price index, is due out Friday and may determine future direction. The key U.S. monthly jobs report for September will come out next week.

The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to curb inflation.

About 76.5% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November. Just 23.5% expect it to raise rates another 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold. 

A stalemate in the U.S. Congress may lead to a government shutdown as Republican lawmakers refuse to compromise on additional spending cuts. Current spending laws are set to expire on Saturday. The uncertainty over the standoff is likely to be supportive for gold, which is a traditional hedge against uncertainty. 

Front-month silver futures increased 2% last week to settle at $23.84 an ounce on Comex after the December contract gained 0.7% Friday. Silver is down 3.9% this month after slipping 0.6% in August and gaining 8.5% in July. It’s down 0.8% in 2023. The December contract is currently down $0.124 (-0.52%) an ounce to $23.720 and the DG spot price is $23.45.

Spot palladium rose 0.4% last week to $1,270.50 an ounce, though it lost 1.2% Friday. Palladium is up 3.4% this month after sliding 5.3% in August and rising 3.6% in July. Palladium has plummeted 30% so far this year. The current DG spot price is down $17.60 an ounce to $1248.50.

Spot platinum edged up 0.2% last week to $936.50 an ounce after increasing 0.8% Friday. Platinum is down 3.9% this month after advancing 1.7% in August and gaining 5.2% in July. Platinum is down 12% in 2023. The DG spot price is currently down $14.30 an ounce to $922.80.

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