Gold steady near a two-week high early Friday after rallying in the previous session on haven demand triggered by geopolitical uncertainty in the Middle East and Asia. The metal is also getting support from interest rate cut optimism.
Heightening tensions between Israel and Hezbollah in Lebanon threatened to head into war, and Russia and North Korea signed a new alliance this week during a visit to Pyongyang by Russian President Vladimir Putin.
Investors were awaiting further direction from new U.S. data economic data due out Friday, including on existing home sales and the index of leading economic indicators. Richmond Federal Reserve President Thomas Barkin was also scheduled to speak Friday and may provide some insight on the central bank’s thinking about the economy and monetary policy.
August gold futures rose 0.9% Thursday to settle at $2,369.00 an ounce on Comex and the most-active contract gained 0.9% so far this week. U.S. financial markets were closed Wednesday for the Juneteenth federal holiday, so metals trades on Comex posted for Thursday. Bullion gained 1.9% last month after rallying 2.9% in April and rising 8.9% in March – the biggest monthly gain in more than three years. May’s was the fourth consecutive monthly rally. The metal rose 13% in 2023. The August contract is currently down slightly by $0.70 (-0.03%) to $2368.30 and the DG spot price is $2354.00.
Most market speculation remains around monetary policy and when the Fed might begin interest rate cuts. The central bank kept interest rates unchanged again last week.
The CME FedWatch Tool shows 89.7% of the investors tracked are betting that the Fed will keep rates unchanged in July. But 65.9% expect the central bank to start cutting in September. The Fed has kept interest rates steady at 5.25% to 5.50% for about a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
The prospect of continued high interest rates would be considered bearish for gold, which becomes less attractive than some other assets when rates are elevated.
The Fed has a 2% inflation target. The last consumer price index report showed that inflation slowed in May, though consumer prices were up 3.3% from a year earlier. The Fed has said it closely watches inflation and the labor market when setting monetary policy. The Fed’s favorite inflation measure, the personal consumption expenditures price index, comes out in a week, on June 28.
The Bank of England on Thursday held interest rates unchanged at 5.25%, as anticipated. But the vote wasn’t unanimous, with two of nine voting members supporting a rate cut. The latest inflation data, out Wednesday, showed inflation was back at its 2% target, and the policy statement issued by the central bank said the decision to keep rates on hold had been “finely balanced” by some members.
Also Thursday, U.S. weekly initial jobless claims came in little changed for last week, at 238,000, near economists’ median forecast of 235,000. The prior week, claims were at a 10-month high.
September silver futures gained 4.2% Thursday to settle at $31.15 an ounce on Comex. The front-month contract, which rolled to September from July this week, rallied 5.7% so far this week. Silver surged 14% last month after rising 7% in April and gaining 8.9% in March. It ticked up 0.2% in 2023. The September contract is currently down $0.563 (-1.81%) an ounce to $30.585 and the DG spot price is $20.98.
Spot palladium added 2.9% Thursday to $928.00 an ounce and gained 2.4% so far this week. Palladium declined 5.1% in May after losing 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. Currently, the DG spot price is up $36.50 to $1005.00.
Spot platinum increased 0.4% Thursday to $985.80 an ounce and is up 2.5% so far this week. Platinum advanced 10% in May after gaining 3.1% in April and rising 3.3% in March. Platinum dropped 6.8% in 2023. The DG spot price is currently up $7.80 an ounce to $995.10.
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