Gold steady ahead of Next Week’s Fed

Gold steady ahead of Next Week's Fed

Gold steady early Wednesday, trading in a tight range ahead of next week’s Fed meeting as investors await the central bank’s rate decision for further direction. The bullion is also getting support from an anemic dollar.

The yellow metal retreated below the $1,800 threshold this week as investors anticipated additional interest rate hikes which would be bullish for the precious metal. But mixed economic reports in recent weeks have increased speculation over the size of the rate increase. The Fed has raised rates by 375 basis points this calendar year to tame 40-year highs in inflation. The rate hikes were 75 basis points each in June, July, September, and November. 

Some softness in the dollar, which also traded in a tight range, weighed on gold, while the yellow got a boost from the further easing of COVID-19 restrictions in China, the world’s largest gold consumer. 

Front-month gold futures rose $1.10 Tuesday to settle at $1,782.40 an ounce on Comex, though the February contract dropped 1.5% in the first two days of the week. Bullion gained 7.3% in November, its first monthly rally since March. The metal is down 2.5% this year. The February contract is currently up $9.20 (+0.52%) an ounce to $1791.60 and the DG spot price is $$1786.30.

Investors are betting there’s a 77% chance the Fed will raise interest rates by 50 basis points in December, compared with 61.5% anticipating that size move a month ago. About 23% of investors tracked by the CME FedWatch Tool are projecting another 75-basis-point hike, compared with 38.5% a month ago. 

The Fed closely watches reports on inflation and the U.S. labor market when it makes monetary policy decisions. The November consumer price index will be released on Dec. 13, and Fed policymakers meet on Dec. 13 and Dec. 14, with the rate decision due on Dec. 14. 

The most recent reports last week indicated that U.S. jobs growth was much better than economists forecast in November, while the Fed’s favorite inflation measure, the personal consumption expenditures price index, posted its second-smallest increase this year in October.  

Upcoming reports this week include U.S. weekly initial jobless claims Thursday and the producer price index, wholesale inventories, and the University of Michigan consumer sentiment index on Friday. 

Front-month silver futures fell 0.4% Tuesday to settle at $22.34 an ounce on Comex, and the March contract tumbled 3.9% in the first two days of the week. Silver increased 14% in November, its biggest monthly gain since December 2020. It’s down 4.4% this year. The March contract is currently up $0.310 (+1.39%) an ounce to $22.645 and the DG spot price is $22.70.

Spot palladium retreated 1.4% Tuesday to $1,871.00 an ounce and is down 2.8% so far this week. Palladium rose 0.3% last month after declining 15% in October. It’s down 2.3% in 2022. Currently, the DG spot price is up $15.50 an ounce to $1882.00.

Spot platinum decreased 1.4% Tuesday to $992.90 an ounce, and it dropped 3.2% in the first two days of the week. Platinum gained 11% in November, its best month since February 2021. It’s up 2% this year. The current DG spot price is up $25.20 an ounce to $1022.50.

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