Gold steady headed for fifth weekly gain

Gold steady headed for fifth weekly gain

Gold steady, little changed early Friday, headed for fifth weekly gain on support from geopolitical risk following an Israeli attack on Iran, but under pressure as the dollar and Treasury yields strengthened on remarks by a Federal Reserve official.

The Israeli strike was the first response to Iran’s attack on Israel last weekend, but its scope was unclear. Gold typically attracts haven demand in times of uncertainty. But there was a cap on prices as the dollar and Treasury yields rose on comments from New York Federal Reserve President John Williams that mentioned the possibility of another interest rate increase.

While Williams said a rate hike wasn’t in his base case, the mere reference caused the dollar and Treasury yields to strengthen and pressured gold. Still, Williams said that “if the data are telling us that we would need higher interest rates to achieve our goals, then we would obviously want to do that.”

Gains in the dollar and Treasury yields, as well as high interest rates, are typically bearish for gold, making the yellow metal a less attractive alternate investment. 

Front-month gold futures gained 0.4% Thursday to settle at $2,398.00 an ounce on Comex, and the most-active June contract is up 1% so far this week. Bullion rose 8.9% in March – the biggest monthly rise in more than three years – after dropping 0.6% in February and declining 0.2% in January. The metal rose 13% in 2023. The June contract is currently up $0.90 (+0.04%) an ounce to $2398.90 and the DG spot price is $2386.10.

About 96.1% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 3.9% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last month. While 83% of investors also expect the Fed to hold rates at current levels in June, and more than half anticipate rates holding steady in July. Most investors are now anticipating a rate cut in September. 

Recent inflation reports topped investors’ forecasts, rather than declining toward the Fed’s 2% goal, and increasing speculation that the Fed isn’t likely to cut rates anytime soon, as previously expected. The Fed closely watches both labor market conditions and inflation when determining monetary policy.  

U.S. weekly initial jobless claims were unchanged at 212,000 last week, according to data released Thursday by the Labor Department. That indicates that the labor market remains strong and may able to tolerate high interest rates for a while longer. 

Last week, U.S. consumer price index data topped forecasts for March. So-called core CPI – which excludes volatile food and energy costs – rose 0.4% last month from February, while the year-on-year rate was unchanged at 3.8%, according to U.S. government data. Wholesale prices also heated up again last month, according to producer price index data released separately. 

Meanwhile, the Beige Book, the Fed’s economic report from its 12 regional banks, showed that the economy “expanded slightly” since late February. The report came out Wednesday.

July silver futures fell 1.6 cents Thursday to settle at $28.66 an ounce on Comex, though the most active contract, which rolled to July from May this week, is up 1.2% in the first four days of the week. Silver gained 8.9% in March after losing 1.2% in February and falling 3.8% in January. It ticked up 0.2% in 2023.   The May contract is currently up $0.082 (+0.29%) an ounce to $28.745 and the DG spot price is $28.48.

Spot palladium decreased $1.50 Thursday to $1,039.50 an ounce and is down 2.9% so far this week. Palladium advanced 7.7% last month after falling 4.6% in February and tumbling 11% in January. Palladium plummeted 38% last year. Currently, the DG spot price is down $12.00 an ounce to $1028.50.

Spot platinum edged up 20 cents Thursday to $948.80 an ounce and is down 4.3% in the first four days of the week. Platinum rose 3.3% last month after decreasing 4.9% in February and falling 8% in January. Platinum dropped 6.8% in 2023. The current DG spot price is down $12.90 an ounce to $936.60.

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