Gold Ticks Up Ahead of Federal Reserve

Gold Ticks Up Ahead of Federal Reserve

Gold ticks up ahead of monetary policy decisions from the U.S. Federal Reserve as inflation concerns continue to fluster the markets.

The central bank is widely expected to escalate the pace at which it tapers pandemic stimulus measures, particularly after last week’s inflation report. The Federal Open Market Committee could also indicate when the policymakers plan to boost interest rates, which would be bearish for gold.

The U.S. consumer price index, a closely watched barometer on inflation, surged to a 39-year high of 6.8% last month, according to a report released Friday, exceeding already-high expectations for a 6.7% year-on-year increase.

February gold futures rose 90 cents last week to settle at $1,784.80 an ounce on Comex after adding 0.5% Friday. The precious metal has been rangebound in recent weeks, closing between $1,762.70 and $1,788.10 since Nov. 23. Gold decreased 0.4% in November after advancing 1.5% in October. The yellow metal is down 5.8% so far in 2021. Currently, the February contract is up $4.30 (+0.24%) an ounce to $1,789.10 and the DG spot price is $1,788.30.

Gold is a traditional hedge against inflation, as are the dollar and Treasury yields, and all three markets closely track economic indicators and the Fed’s likely actions. Gold historically comes under pressure when the dollar and Treasury yields strengthen, as that increases the opportunity cost of bullion for investors holding other currencies.

U.S. equities also surged to a record Friday, making gold less attractive as an alternate investment.

In addition to the FOMC announcement and a press conference by Fed Chairman Jerome Powell on Wednesday, investors will be watching for the release of November retail sales data, the NAHB home builders’ index and business inventories for more indications on the state of the economy. U.S. weekly initial jobless claims — which dropped to their lowest level in more than half a century in the last report — come out Thursday.

Investors were also grappling with what the omicron variant of the coronavirus will mean for the global economic recovery and whether further lockdowns that would hurt growth could become necessary.

March silver futures decreased 1.3% last week to settle at $22.20 an ounce on Comex, though the front-month contract rallied 0.8% Friday. Silver fell 4.7% in November after rising 8.6% in October. The metal is down 16% so far this year. Silver prices are tied to industrial demand. The March contract is currently up $0.195 (+0.88%) an ounce to $22.390 and the DG spot price is $22.40.

Spot palladium retreated 3.6% last week to $1,767.00 an ounce after losing 3.2% Friday. It plummeted 13% in November after rallying 4.3% in October. It’s down 28% so far in 2021. The DG spot price is currently up $5.70 an ounce to $1,773.50.

Spot platinum rose 0.3% last week to $947.00 an ounce after gaining 0.2% Friday. The metal dropped 8.1% last month after rising 6% in October. It’s down 12% so far this year. Currently, the DG spot price is down $6.80 an ounce to $943.40.


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