Gold surged to a new record high early Monday, extending last week’s gains, amid increased optimism about an eventual Federal Reserve interest rate cut and haven demand connected with the uncertainty in the Middle East.
Rate cut optimism has spurred a broader market rally that took the Dow Jones Industrial Average to close at an all-time record high above 40,000 for the first time on Friday. Silver futures topped $30 an ounce on Friday to hit the highest level in a decade amid projected deficits in the metal in the fourth quarter as well as increased interest from investors and supportive macroeconomic signals.
Gold resumed its historic role as a hedge against geopolitical uncertainty after a helicopter carrying Iran’s president and foreign minister crashed Sunday. Reports from Iran said there were no signs of life at the crash site. Gold also has support because of the wars in Gaza and Ukraine.
Front-month gold futures climbed 1.8% last week to settle at $2,417.40 an ounce on Comex after the most-active June contract surged 1.3% Friday. Bullion gained 2.9% in April after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. The Jund contract is currently up $3.60 (+0.15%) an ounce to $2421.00 and the DG spot price is $2419.30.
July silver futures surged 9.7% last week to settle at $31.26 an ounce on Comex after the front-month contract increased 4.6% Friday. Silver rose 7% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract is currently up $0.506 (+1.62%) an ounce to $31.765 and the DG spot price is $31.55.
Investors are looking to a series of speeches by Fed officials this week for further direction. Fed Governor Christopher Waller, in particular is scheduled to speak about the U.S. economy and monetary policy on Tuesday. Minutes of the last Fed monetary policy meeting are scheduled to come out Wednesday. U.S. initial jobless claim come out Thursday, and U.S. durable goods and University of Michigan consumer sentiment data come out Friday.
Last week’s rally gained steam after the consumer price index data for April, which came out Wednesday, showed that inflation eased, even as it remained well above the Fed’s 2% target.
The Fed has raised interest rates by 5.25 percentage points since March 2022 in an effort to rein in inflation. It was widely expected to start rate cuts earlier this year, but the timeline has been stymied by persistently high inflation. The prospect of lower interest rates is typically bullish for gold, which becomes a more attractive alternate investment.
About 96.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 3.5% expect a 25 basis point cut. More than 75% of investors also expect the Fed to hold rates at current levels in July. Most investors don’t expect a rate cut until September. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting.
Spot palladium gained 2.8% last week to $1,016.00 an ounce and increased 1.2% Friday. Palladium declined 5.9% last month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the DG spot price is up $13.20 an ounce to $1031.50.
Spot platinum rallied 8.7% last week to $1,089.90 an ounce and rose 2.3% Friday. Platinum gained 3.1% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The DG spot price is currently down $29.10 an ounce to $1056.90.
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