Gold ticks up on US May inflation data while investors await today’s Federal Reserve monetary policy statement.
A surprisingly soft U.S. consumer inflation report raised hopes for at least one rate cut in 2024. U.S. gold futures rose 1.2% to $2,335.50 on the news. The headline consumer price index was flat on a month-on-month basis in May, below expectations for a 0.1% gain. Core prices rose 0.2%, also below economists’ projections for a 0.3% increase.
The central bank has held interest rates steady for almost a year and is widely expected to do so again Wednesday, but investors will be looking at the Fed’s post-policy meeting statement and comments from Fed Chairman Jerome Powell for signals on when it might begin interest rates cuts. The Fed has said it closely watches inflation and the labor market when setting monetary policy, and the May consumer price index also comes out Wednesday.
The Fed has raised interest rates by 5.25 percentage points since March 2022 to rein in inflation. It was expected to begin rate cuts early this year but the timeframe has been pushed back amid persistently high inflation and a resilient job market. The prospect of continued high interest rates would be considered bearish for the yellow metal, which becomes less attractive than some other assets when rates are high.
August gold futures fell 40 cents Tuesday to settle at $2,326.60 an ounce on Comex, but the most-active contract is up $1.60 so far this week. Bullion gained 1.9% last month after rallying 2.9% in April and rising 8.9% in March – the biggest monthly gain in more than three years. May’s was the fourth consecutive monthly rally. The metal rose 13% in 2023. The August contract is currently up $15.90 (+0.68%) an ounce to $2342.50 and the DG spot price is $2329.30.
The CME FedWatch Tool shows that most investors are expecting the Fed to hold interest rates at 5.25% to 5.50% until the September meeting. Almost 100% of the investors tracked are betting that the Fed will keep rates unchanged Wednesday. More than 83.4% of investors also expect the Fed to hold rates at current levels in July, while 62% forecast the rate will go down 25 basis points in September. Persistently high inflation caused the Fed to keep interest rates unchanged at policymakers’ last meeting.
Separately, Asian demand for gold is climbing despite the yellow metal’s near-record prices because of haven investors seeking a hedge against geopolitical and economic uncertainty, Reuters reported. It’s also more attractive than other investment options like real estate and equities, Reuters said.
July silver futures dropped 2.2% Tuesday to settle at $29.23 an ounce on Comex, and the front-month contract lost 0.7% in the first two days of the week. Silver surged 14% last 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 $0.639 (+2.19%) an ounce to $29.870 and the DG spot price is $29.90.
Spot palladium fell 1.5% Tuesday to $898.50 an ounce and has tumbled 2.7% so far this week. Palladium declined 5.1% in May after losing 5.9% in April and advancing 7.7% in March. Palladium plummeted 38% last year. Currently, the DG spot price is up $26.60 an ounce to $922.00.
Spot platinum decreased 1.8% Tuesday to $961.00 an ounce and is down 1.3% so far this week. Platinum advanced 10% 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 $10.10 an ounce to $971.00.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.