Gold ticks up headed for Fourth Monthly rally

Gold ticks up headed for Fourth Monthly rally

Gold ticks up on the release of a key inflation measure, headed for fourth consecutive monthly rally. The DG spot price rose over $13 an ounce to $2358 on the news.

The April personal consumption expenditures price index, the Fed’s favorite inflation measure, increased 0.2% in April and 2.8% from a year ago, in line with estimates. Personal income increased 0.3% for April, matching the estimate. The Fed was widely expected to begin a series of rate cuts in the first part of this year, but the timeline has been pushed back by persistently high inflation. High interest rates are typically bearish for gold, making them a less attractive alternate investment than other assets. 

August gold futures rose 0.1% Thursday to settle at $2,366.50 an ounce on Comex, and the most-active contract gained 0.4% so far this week. U.S. financial markets were closed Monday for the Memorial Day holiday, and gold traded electronically that day without a settlement. Bullion has gained 2.8% so far this month after rallying 2.9% in April and rising 8.9% in March – the biggest monthly gain in more than three years. The metal rose 13% in 2023. Currently, the August contract is up $5.30 (+0.22%) an ounce to $2371.80 and the DG spot price is $2354.20.

The U.S. economy grew more slowly than previously reported in the first quarter, according to data released Thursday. U.S. GDP rose an annualized 1.3% in the first three months of the year, below the previous estimate of 1.6% issued by the Bureau of Economic Analysis. Personal spending rose 2.0%, compared with a previous estimate of 2.5%. 

New York Fed President John Williams said Thursday that he’s confident that inflation will start dropping later this year, though it currently remains too high. Fed has a 2% target for inflation. The central bank has raised interest rates by 5.25 percentage points since March 2022 to rein in inflation but has held rates steady for almost a year.

“With the economy coming into better balance over time and the disinflation taking place in other economies reducing global inflationary pressures, I expect inflation to resume moderating in the second half of the year,” he said, according to CNBC. “But let me be clear: Inflation is stull above our 2% longer-run target, and I am very focused on ensuring that we achieve both of our dual mandate goals. 

Minutes of the last Fed policy meeting, released last week, showed that it would probably take longer than the members had previously thought to start interest rate cuts. In addition to inflation and economic conditions, the Fed will be closely watching the monthly U.S. jobs report that comes out next week. 

About 98.9% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in June, while 1.1% expect a 25 basis point increase. More than 85% of investors also expect the Fed to hold rates at current levels in July and about half see rates staying unchanged in September. Many investors don’t expect a rate cut until November. Persistently high inflation caused the Fed to keep interest rates unchanged at 5.25% to 5.50% at policymakers’ last meeting. 

Meanwhile, markets braced for possible volatility Friday after former U.S. President Donald Trump was convicted on 34 felony counts late Thursday. 

July silver futures fell 2.6% Thursday to settle at $31.53 an ounce on Comex, though the front-month contract increased 3.4% so far this week. Silver is up 18% this month after rising 7% in April and gaining 8.9% in March. It ticked up 0.2% in 2023. The July contract is currently up $0.041 (+0.13%) to $31.575 and the DG spot price is $31.52.

Spot palladium lost 1.1% Thursday to $962.50 an ounce and decreased 1.4% so far this week. Palladium is down 0.5% in May after declining 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. Currently, the DG spot price is down $2.20 an ounce to $958.00.

Spot platinum decreased 1.2% Thursday to $1,035.80 an ounce and is down 50 cents so far this week. Platinum is up 9.8% in May after gaining 3.1% in April and rising 3.3% in March. Platinum dropped 6.8% in 2023. The DG spot price is currently up $10.00 an ounce to $1047.00.

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