Gold tips up early Wednesday on weaker bond yields before this afternoon’s Fed decision. Investors await the decision and Chairman Jerome Powell’s statement about the state of the economy for further direction.
The central bank is widely expected to keep interest rates unchanged at 5.25% to 5.50% until May, particularly after the latest inflation and jobs reports demonstrated market resilience. The consumer price index data for November showed Tuesday that inflation slowed last month but remained well above the Fed’s 2% target. Producer price index data for November will come out Wednesday. Last week, the U.S. monthly jobs report for November beat estimates, and U.S. consumer sentiment for December also topped all forecasts.
Front-month gold futures lost 50 cents Tuesday to settle at $1,993.20 an ounce on Comex, and the February contract is down 1.1% in the first two days of this week. Bullion rose 3.2% last month after gaining 6.9% in October and falling 5.1% in September. The metal is up 9.1% in 2023. The February contract is currently up $4.30 (+0.22%) an ounce to $1997.50 and the DG spot price is $1984.00.
So-called core CPI, which excludes volatile food and energy prices increased 0.3% in November from a month earlier and 4% from a year ago, according to data released Tuesday from the Labor Department. The data showed an increase of 0.1% for the month and 3.1% year on year when food and energy prices were included. Economists had forecast no gain for the month and a yearly rate of 3.1%, so the figures were mostly in line with estimates but slightly worse.
Fed officials have said they closely watch both inflation and labor market reports when crafting monetary policy decisions. Higher interest rates are typically bearish for gold, which becomes a less attractive asset for investors in comparison with instruments like bonds. A pause or a cut in interest rates would therefore be bullish for the yellow metal.
The CME FedWatch Tool shows that 98.2% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged Wednesday, while 1.8% are expecting a 25 basis point increase. The central bank is expected to keep rates unchanged in January and March, too, but most investors tracked by the tool are betting on a rate cut in May. The central bank has boosted rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level.
The European Central Bank and Bank of England are both scheduled to announce monetary policy decisions later this week.
Front-month silver futures decreased 0.2% Tuesday to settle at $23.02 an ounce on Comex, and the March contract is down 1.1% so far this week. Silver advanced 12% in November after increasing 2.2% in October and decreasing 9.5% in September. It’s down 4.3% in 2023. The March contract is currently down $0.111 (-0.48%) an ounce to $22.905 and the DG spot price is $22.61.
Spot palladium gained 1.6% Tuesday to $995.00 an ounce and is up 3% so far this week. Palladium lost 9.5% last month after dropping 10% in October and rising 3% in September. Palladium has plummeted 45% so far this year. Currently, the DG spot price is up $1.70 an ounce to $997.50.
Spot platinum advanced 1.4% Tuesday to $932.20 an ounce, and it gained 0.6% in the first two days of the week. Platinum fell 0.7% in November after gaining 3.5% in October and declining 6.6% in September. Platinum is down 13% in 2023. The DG spot price is currently up $2.10 an ounce to $935.60.
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