Gold Steady as investors await Fed

Gold Steady as investors await Fed

Gold steady early Wednesday as investors await the Fed monetary policy decision this afternoon – expected to be a pause in interest rate hikes – and looked for guidance on whether the rate increase cycle would resume after this month’s Federal Reserve policy meeting.

The Fed has raised rates by 5.25 percentage points since March 2022 in an effort to curb inflation. A halt or pause in interest rates would be considered bullish for gold, which loses its luster when interest rates go up, becoming a less attractive investment that some alternatives.

Front-month gold futures slipped 20 cents Tuesday to settle at $1,953.20 an ounce on Comex, though the December contract gained 0.4% in the first two days of the week. Bullion dropped 2.2% in August after rising 4.1% in July and losing 2.7% in June. The metal is up 7% in 2023. The December contract is currently down $0.20 (-0.01%) an ounce to $1953.50 and the DG spot price is $1937.10.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% Tuesday, Reuters reported. 

The Organization for Economic Cooperation and Development forecast a slowdown in the world economy next year in an outlook released Tuesday. It predicted growth will ease to 2.7% from 3% this year. 

“The near-term global outlook is shaped by the increasingly visible impact of monetary policy tightening by most major central banks and stresses in the Chinese economy,” the outlook stated. But it said that “monetary policy should remain focused on bringing inflation back to target.”

About 99% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged Wednesday at 5.25% to 5.50%. Just 1% expect it to raise rates another 25 basis points. Most still expect the Fed to hold at the remainder of policymakers’ meetings this year – by a margin of 69.2% for November and 60.3% for December.

Last week, two key U.S. inflation gauges for August – the consumer price index and the producer price index – indicated that costs of goods and services are still rising. This bolstered speculation that the Fed is likely to keep rates high for some time.  

The Bank of England is expected to raise interest rates again this week, and the Bank of Japan is also set to issue a monetary policy decision Friday. The European Central Bank announced a 10th consecutive interest rate hike last week. 

Front-month silver futures decreased 0.2% Tuesdsay to settle at $23.46 an ounce on Comex, though the December contract advanced 0.3% in the first two days of the week. Silver slipped 0.6% in August after gaining 8.5% in July and dropping 2.4% in June. It’s down 2.4% in 2023. The December contract is currently up $0.054 (+0.23%) an ounce to $23.510 and the DG spot price is $23.36.

Spot palladium rallied 1.8% Tuesday to $1,282.00 an ounce and is up 1.3% so far this week. Palladium slid 5.3% last month after rising 3.6% in July and falling 9.5% in June. Palladium has plummeted 29% so far this year. The current DG spot price is up $29.50 an ounce to $1308.00.

Spot platinum gained 1% Tuesday to $951.30 an ounce and is up 1.7% this week. Platinum advanced 1.7% in August after gaining 5.2% in July and falling 9.3% in June. Platinum is down 11% in 2023. The DG spot price is currently down $0.60 an ounce to $950.80.

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.