Gold ticks up ahead of Fed minutes

Gold ticks up ahead of Fed minutes

Gold ticks up but still sticking in a tight range Wednesday morning ahead of Fed minutes as markets eye Middle East tensions.

Investors were awaiting the minutes of the Federal Reserve’s last policy meeting, which are due out Wednesday, for signals on the central bank’s thinking about future interest rate cuts. The Fed is widely expected to keep interest rates elevated until June after a series of positive economic reports and negative inflation reports. Meanwhile, safe-haven demand for gold was buoyed by escalating conflict in the Middle East.

Front-month gold futures rose 0.8% Tuesday to settle at $2,039.80 an ounce on Comex after the most-active April contract fell  0.7% last week. Comex trading on Monday didn’t settle until Tuesday because of the U.S. Presidents Day holiday, which shuttered government offices, banks and financial markets. Bullion declined 0.2% in January after gaining 0.7% in December and rising 3.2% in November. The metal rose 13% in 2023. The April contract is currently up $0.90 (+0.04%) an ounce to $2040.70 and the DG spot price is $2028.70

In addition to the Fed minutes, a number of Fed officials are scheduled to speak this week and may provide further direction. They include Atlanta Fed President Raphael Bostic on Wednesday and Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkari on Thursday. The European Central Bank is also set to release an account of its January meeting on Thursday. 

Last week, the U.S. consumer price index and producer price index came in hotter than expected for January, making it less likely that the Fed will cut rates in the next few months. But U.S. consumer sentiment increased for a third straight month in February, a sign of a resilient economy that the Fed may see as able to tolerate the high rates. 

Higher interest rates are typically considered bearish for gold, so cuts would be supportive for the precious metal. But holding rates high for a longer period of time would be bearish. 

About 93.5% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged next month, while 6.5% expect a 25 basis point cut. A month ago, about half of investors were anticipating a cut in March. A majority of investors tracked by the tool now also anticipate the Fed will hold rates steady at the following policy meeting in May, too. Most are now looking to June for a rate cut.

The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% earlier this month. 

In other economic news, U.S. initial jobless claims and existing home sales are scheduled to come out Thursday. 

Front-month silver futures fell 1.4% Tuesday to settle at $23.14 an ounce on Comex after the March contract gained 3.9% last week. Silver fell 3.8% in January after dropping 6.1% in December and advancing 12% in November. It ticked up 0.2% in 2023. The March contact is currently down $0.051 (-0.22%) an ounce to $23.085 and the DG spot price is $23.09.

Spot palladium gained 3.8% Tuesday to $996.50 an ounce Tuesday after rising 9.2% last week. Palladium tumbled 11% last month after advancing 8.6% in December and losing 9.5% in November. Palladium plummeted 38% last year. The current DG spot price is down $8.30 an ounce to $985.00.

Spot platinum edged up 30 cents Tuesday to $912.40 an ounce after increasing 3.6% last week. Platinum fell 8% last month after rising 8.1% in December and falling 0.7% in November. Platinum dropped 6.8% in 2023. The DG spot price is currently down $15.70 an ounce to $898.60.

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