Gold ticks up after three-week slump amid expectations that the Federal Reserve will keep raising interest rates beyond 5% to stem rising inflation.
A series of positive economic reports– and two inflation reports showing that the costs of goods and services to both consumers and producers continued to rise last month – lent weight to speculation that rate hikes could proceed without damaging growth. Investors this week will be awaiting the release of the minutes from the Fed’s last policy meeting for further direction.
Interest rate increases are considered bearish for gold because they make the metal less attractive as an alternate investment. The sentiment also boosted the U.S. dollar index, which is bearish for gold.
Front-month gold futures fell 1.3% last week to settle at $1,850.20 an ounce on Comex after the April contract slipped $1.60 Friday. Bullion increased 6.5% in January after gaining 3.8% in December and gaining 7.3% in November. It was the longest consecutive monthly rally since July 2020. The metal fell $2.40 in 2022. The April contract is currently up $5.0 (+0.27%) an ounce to $1855.20 and the DG spot price is $1847.60.
Most U.S. financial markets were closed Monday for the Presidents Day holiday, so volumes were expected to be light. Comex metals futures were trading electronically but won’t post a settlement until Tuesday.
The Fed raised rates by 25 basis points on Feb. 1 to 4.50% to 4.75%. The move followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September, and November. The minutes of the Jan. 31-Feb. 1 meeting are set for release Wednesday, and investors will be parsing them closely for indications on future moves.
While most investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by another 25 basis points in March, more are banking on a larger hike since last week’s economic reports. The tool shows 79.00% of investors anticipating a 25-basis-point hike, with the remaining 21.00% expecting the Fed to raise rates by 50 basis points. A week ago, 90.8% of those tracked were expecting a 25 basis point increase.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, is due out Friday with January data and is likely to influence market sentiment. The consumer price index increased by 0.5% in January, the most in three months, and was up 6.4% from a year earlier, data released last week showed. Wholesale costs rose more than expected in January, with the producer price index topping analysts’ biggest growth estimate.
Silver futures dropped 1% last week to settle at $21.86 an ounce on Comex as the front-month contract rolled to May from March. The May contract retreated 1.4 cents Friday. Silver fell 0.9% in January after rising 10% in December and increasing 14% in November. It advanced 3% in 2022. The March contract is currently up $0.140 (+0.64%) an ounce to $21.855 and the DG spot price is $21.88.
Spot palladium slid 2.2% last week to $1,525.00 an ounce after falling 1.9% Friday. Palladium dropped 7.5% in January after retreating 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is up $20.00 an ounce to $1547.50.
Spot platinum decreased 3% last week to $927.60 an ounce and fell 0.9% Friday. Platinum retreated 4.3% in January after increasing 3.4% in December and rising 11% in November. It surged 10% in 2022. The DG spot price is currently up $12.30 an ounce to $939.70.
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