Gold steady below $2,000 threshold

Gold steady below $2,000 threshold

Gold steady below $2,000 threshold early Wednesday, sticking to elevation from the conflict in the Middle East and softer U.S. Treasury yields, but pressured by diplomatic efforts to keep the Israel-Hamas war from spreading and expectations that the Federal Reserve will keep interest rates high.

The yellow metal stalled at the $2,000-an-ounce technical resistance level after rallying more than 8% in the two weeks after the war began. Gold is a traditional haven asset and attracts investors in times of geopolitical uncertainty. 

Front-month gold futures slipped $1.70 Tuesday to settle at $1,986.10 an ounce on Comex as the December contract dropped 0.4% in the first two days of the week. Bullion is up 6.4% so far this month after falling 5.1% in September and dropping 2.2% in August. The metal is up 8.8% in 2023. The December contract is currently down $1.00 (-0.05%) an ounce to $1985.10 and the DG spot price is $1974.60.

Hamas released two Israeli hostages Tuesday after negotiations facilitated by the International Committee of the Red Cross. Further diplomatic efforts are underway to release more hostages and stem the crisis. 

Meanwhile, investors turned their focus to the economy. The Fed’s favorite inflation measure, the personal consumption expenditures price index, will come out Friday with September data and will likely influence the Fed’s November monetary policy decision. 

Investors will also closely watch the release of other key economic reports, including U.S. third-quarter GDP and weekly initial jobless claims on Thursday. The European Central Bank is widely expected to hold interest rates unchanged at a policy meeting Thursday after 10 interest rate hikes to curb inflation. 

Investors also overwhelmingly expect the Fed to keep interest rates unchanged at 5.25% to 5.50% in November, following a pause in September. Lower interest rates – or a pause in rate hikes – is considered bullish for gold because the yellow metal comes under pressure when rates go up and other assets become more attractive.

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

About 97.2% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November, while 2.8% expect it to raise rates by 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold. 

Front-month silver futures decreased 0.4% Tuesday to settle at $23.12 an ounce on Comex after the December contract retreated 1.7% in the first two days of the week. Silver has increased 3% so far this month after decreasing 9.5% last month and slipping 0.6% in August. It’s down 3.8% in 2023. The December contract is currently down $0.181 (-0.78%) an ounce to $22.935 and the DG spot price is $22.81.

Spot palladium fell 0.5% Tuesday to $1,143.00 an ounce, though it’s up 1.9% this week.  Palladium has dropped 9.7% in October after rising 3% last month and sliding 5.3% in August. Palladium has plummeted 37% so far this year. The current DG spot price is up $15.50 an ounce to $1150.00.

Spot platinum slid 1.4% Tuesday to $892.10 an ounce as it lost 1.5% in the first two days of the week. Platinum is down 2.1% in October after declining 6.6% last month and advancing 1.7% in August. Platinum is down 17% in 2023. The DG spot price is currently up $8.60 an ounce to $901.00.

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