Gold Sticks Above $1800 ahead of Fed

Gold Sticks Above $1800 ahead of Fed

Gold sticks above $1800 an ounce, trading in a tight range early Wednesday ahead of the final Fed interest rate decision of the year.

The Fed has raised rates by 375 basis points this calendar year to tame 40-year highs in inflation. High interest rates are typically bearish for gold, though the yellow metal has traditionally served as a hedge against inflation.

U.S. consumer prices rose less than expected in November, data released Tuesday showed, in a signal that inflation may finally be responding to the Fed’s rate hikes and require a less aggressive rate increase. The CPI gained just 0.1% from October and was up 7.1% from November 2021, according to data from the Labor Department. The forecast from economists surveyed by Dow Jones was a 0.3% increase for the month and a 7.3% gain for the year. 

Front-month gold futures rose 1.9% Tuesday to settle at $1,825.50 an ounce on Comex. The February contract gained 0.8% 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 currently down $4.20 (-0.23%) an ounce to 1821.30 and the DG spot price is $1813.40.

The Fed is widely expected to add another 50 basis points to rates on Wednesday, bringing benchmark the federal funds rate to 4.25% to 4.5%. Fed Chairman Jerome Powell is scheduled to deliver remarks after the monetary policy announcement, which investors will be parsing closely for signals on the Fed’s plans for 2023. 

The Fed raised rates by 75 basis points each in June, July, September, and November. Investors tracked by the CME FedWatch Tool are betting there’s a 79.4% chance the Fed will boost interest rates by 50 basis points in December and 20.6% odds of another 75-basis-point hike. 

The European Central Bank also has a rate decision scheduled for Thursday at which it’s forecast to deliver a 50 basis point hike. A decision is also due this week from the Bank of England. 

In other U.S. economic news this week, the weekly initial jobless claims come out Thursday, along with November retail sales and industrial production. S&P Manufacturing PMI is scheduled for release Friday.

Front-month silver futures rose 2.5% Tuesday to settle at $23.99 an ounce on Comex. The March contract rallied 1.2% in the first two days of the week. Silver increased 14% in November, its biggest monthly gain since December 2020. It’s up 2.7% this year. Currently, the March contract is up $0.075 (+0.31%) and ounce to $24.065 and the DG spot price is $23.88.

Spot palladium gained 3% Tuesday to $1,954.50 an ounce, though it dropped 1.4% in the first two days of the week. Palladium rose 0.3% last month after declining 15% in October. It’s up 2.1% in 2022. Currently, the DG spot price is down $23.70 an ounce to $1928.00.

Spot platinum increased 3.6% Tuesday to $1,040.90 an ounce, and it advanced 0.9% in the first two days of the week. Platinum gained 11% in November, its best month since February 2021. It’s up 7% this year. The DG spot price is slightly down, $4.50 an ounce, to $1031.40.

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