Gold ticks down early Wednesday remaining subdued ahead of key inflation data due at the end of the week. The yellow metal slipping on higher Treasury yields, a firmer U.S. dollar and hawkish Fed comments.
A larger-than-expected jump in the Federal Reserve’s favorite inflation measure, the personal consumption expenditures price index, could pressure gold prices because it might further delay expected interest rate cuts. The central bank closely watches interest rates and the labor market when setting monetary policy.
Fed Governor Michelle Bowman reiterated that holding rates steady “for some time” would likely bring inflation under control, but said she isn’t expecting any cuts this year. In fact, she’s open to raising rates again if inflation doesn’t improve.
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 an interest rate cut would be bullish for gold since the yellow metal becomes less attractive than some other assets when rates are elevated.
August gold futures fell 0.6% Tuesday to settle at $2,330.80 an ounce on Comex, though the most-active contract lost just 40 cents in the first two days of the week. Bullion is down 0.6% this month after gaining 1.9% in May and 2.9% in April. The metal rose 13% in 2023. The August contract is currently down $20.30 (-0.87%) an ounce to $2310.50 and the DG spot price is $2298.70.
Investors will be closely watching the PCE index release Friday for further indications on the state of the economy. The PCE is forecast to show 2.6% annual growth overall and in the core index, which excludes volatile food and energy prices, according to economists’ projections gathered by Bloomberg. Month-on-month, the core May index is likely to gain 0.1%. The Fed has a 2% inflation target.
Fed Governor Lisa Cook said separately Tuesday that “at some point” it will be time to cut interest rates.
In other economic news, U.S. consumer confidence fell in June, according to data released Tuesday by the Conference Board.
First quarter U.S. GDP data are due out Thursday, along with weekly U.S. initial jobless claims.
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.
September silver futures dropped 2.2% Tuesday to settle at $29.19 an ounce on Comex, and the front-month contract was down 2.5% in the first two days of the week. Silver is down 4.1% this month after surging 14% in May and rising 7% in April. It ticked up 0.2% in 2023. The Fed kept interest rates unchanged again earlier this month. The September contract is currently down $0.148 (-0.51%) an ounce to $29.045 and the DG spot price is $28.77.
Spot palladium tumbled 7.3% Tuesday to $954.00 an ounce and is down 2.4% so far this week. Palladium is up 4% this month after declining 5.1% in May and losing 5.9% in April. Palladium plummeted 38% last year. Currently, the DG spot price is down $11.20 an ounce to $937.00.
Spot platinum decreased 1.3% Tuesday to $989.40 an ounce and has retreated 1.1% so far this week. Platinum is down 5.1% this month after advancing 10% in May and 3.1% in April. Platinum dropped 6.8% in 2023. The DG spot price is currently up $14.20 an ounce to $1004.60.
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