Gold steady ahead of rate decision

Gold steady ahead of rate decision

Gold steady ahead of rate decision, trading in a tight range early Monday as investors awaited Wednesday’s monetary policy announcement from the Federal Reserve amid heightened speculation that it’s likely to be the last interest rate hike in this cycle.

The Fed is widely expected to raise rates another 25 basis points Wednesday. The central bank has increased rates by 5 percentage points since March 2022 in an effort to rein in inflation. But recent economic reports indicating that inflation is slowing while economic growth may be starting to be impacted are likely to influence what the Fed does next. A pause in interest rates hikes would be considered bullish for gold because the metal becomes less attractive to investors when rates go up. 

Front-month gold futures rallied 2.1% last week to settle at $2,005.30 an ounce on Comex after the most-active contract rolled to December from August. December futures slipped 0.2% Friday. Bullion dropped 2.7% last month after retreating 0.9% in May and increasing 0.6% in April. The metal gained 5.7% in the first half of the year after falling $2.40 in 2022. The December contract is currently up $1.9 (+0.09%) an ounce to $2007.20 and the DG spot price is $1963.90.

About 99.8% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise its federal funds rate by 25 basis points to 5.25% to 5.50% at its July monetary policy meeting. Just 0.2% expect it to keep rates unchanged. But the vast majority of investors tracked by the tool are betting that it will be at that rate for the rest of the year, following meetings in September, November and December. 

The Fed held rates unchanged last month for the first time after 10 consecutive increases. It increased rates by 25 basis points three times this year following hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022 and smaller increases in March and May of last year. 

Key consumer confidence data is due out Tuesday, just before the rate decision. The personal consumption expenditures price index, the Fed’s favorite inflation measure, is due out Friday, after the decision. The U.S. consumer price index data for June indicated that the economy shifted into disinflation. U.S. wholesale prices also rose less than expected in June.

Investors this week will also be watching the European Central Bank and the Bank of Japan, which will issue their own policy decisions Thursday. The ECB is expected to raise rates again, though investors will be looking for signals on future decisions. The BOJ is forecast to hold its rates unchanged.  

September silver futures fell 1.4% last week to settle at $24.86 an ounce on Comex. The most-active contract lost 0.4% Friday. Silver dropped 2.4% in June after decreasing 6.5% in May and gaining 4.4% in April. It retreated 4.2% in the first half of the year after rising 3% in 2022. The September contract is currently down $0.155 (-0.62%) an ounce to $24.700 and the DG spot price is $24.45.

Spot palladium increased 1.1% last week to $1,312.50 an ounce after rising 0.8% Friday. Palladium fell 9.5% in June after tumbling 9.3% in May and rising 2% in April. Palladium plummeted 31% in the first half of the year after losing 5.7% in 2022. Currently, the DG spot price is down $5.00 an ounce to $1306.50.

Spot platinum retreated 0.8% last week to $971.10 an ounce, though it gained 0.8% Friday. Platinum fell 9.3% in June after retreating 7.4% in May and adding 8.5% in April. Platinum dropped 15% in the first half of the year after surging 10% in 2022. The DG spot price is currently down $2.60 an ounce to $968.10.

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