Gold steady above $1800 despite some investor profit taking from the rally on Tuesday.
An uptick in the dollar also pressured gold prices, making the yellow metal less attractive as an alternate investment. Markets were quiet heading into the Christmas and New Year’s holidays over the next two weeks.
Front-month gold rose 1.5% Tuesday to settle at $1,825.40 an ounce on Comex, and the February contract advanced 1.4% in the first two days of the week. Bullion increased 7.3% in November, its first monthly rally since March. The metal is down 0.2% this year. The February contract is up $0.4 (+0.02%) an ounce to $1825.80 and he DG spot price is $1818.50.
Lower liquidity ahead of the holidays is making market swings more pronounced. But gold prices continued to take direction from economic news and anticipation of future Federal Reserve actions to rein in 40-year highs in inflation.
The Fed raised U.S. interest rates to the highest level in 15 years last week. Its 50 basis point rate hike was followed by the European Central Bank and the Bank of England.
The Bank of Japan on Tuesday surprised investors by widening the target range of its 10-year Japanese government bond yields, triggering a selloff in bond and stock markets around the world. Lower bond yields are typically bullish for gold.
Federal Reserve Chairman Jerome Powell said that the central bank would maintain its aggressive monetary policy in 2023 despite some investors’ fears of a recession. But the Fed is widely expected to slow the pace of its rate increases, a move seen as supportive for gold. High interest rates are typically bearish for the yellow metal.
The Fed raised rates by 50 basis points last week to 4.25% to 4.5%, and Fed policymakers indicated that they anticipate increasing the rate to 5% to 5.25% by the end of 2023. The central bank has boosted rates by 425 basis points this calendar year.
Investors tracked by the CME FedWatch Tool are betting there’s a 69.5% chance the Fed will boost interest rates by just 25 basis points at policymakers’ next meeting on Feb. 1. The odds are 30.5% in favor of another 50 basis point hike. The December rate increase was the smallest in some time after the Fed raised rates by 75 basis points each in June, July, September, and November.
Investors will continue to closely monitor economic news to determine the Fed’s next steps and the state of the economy. Reports this week include the consumer confidence index and existing home sales Wednesday; U.S. GDP, weekly initial jobless claims and the index of leading economic indicators Thursday; and the PCE price index and University of Michigan consumer sentiment Friday.
Front-month silver futures rallied 4.6% Tuesday to settle at $24.27 an ounce on Comex, and the March contract gained 4% in the first two days of the week. Silver increased 14% in November, its biggest monthly gain since December 2020. It’s up 3.9% this year. The March contract is currently down $0.066 (-0.27%) an ounce to $24.205 and the DG spot price is $24.01.
Spot palladium increased 4.1% Tuesday to $1,758.00 an ounce and is up 1.1% so far this week. Palladium rose 0.3% last month after declining 15% in October. It’s up 4.6% this year. It’s down 8.2% in 2022. Currently, the DG spot price is down $45.00 an ounce to $1718.50.
Spot platinum gained 2.7% Tuesday to $1,017.40 an ounce and is up 1.7% this week. Platinum rose 11% in November, its best month since February 2021. The DG spot price is currently down $13.50 an ounce to $1003.60.
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