Gold up on expectations of 2024 rate cuts 

Gold up on expectations of 2024 rate cuts

Gold up early Wednesday, adding to last week’s gains, on expectations of 2024 rate cuts after a key inflation measure rose less than expected for November. The yellow metal is headed for its best year in three.

The Fed’s favorite inflation measure, the personal consumption expenditures price index, excluding volatile food and energy prices, rose at a 3.2% annual rate last month and was up just 0.1% month on month, according to data Friday from the Commerce Department. Economists had forecast increases of 3.3% and 0.1%. Core PCE increased 1.9% on a six-month basis, essentially putting inflation at the Fed’s target of 2% inflation. 

The report is the latest indicator that the Fed has grounds to begin interest rate cuts after raising them 5.25 percentage points since March 2022 to curb inflation. Lower interest rates are typically bullish for gold, making it a more attractive asset for investors. The prospect of lower rates has also pressured the dollar and Treasury yields, which is supportive for gold as well.  

Front-month gold futures gained 70 cents Tuesday to settle at $2,069.80 an ounce on Comex. Markets were closed Monday for the Christmas holiday. The February contract advanced 1.6% last week. Bullion is up 0.6% this month after rising 3.2% in November and gaining 6.9% in October. The metal is up 13% in 2023. The February contract is currently up $10.60 (+0.51%) an ounce to $2080.40 and the DG spot price is $2072.80.

The CME FedWatch Tool shows that 85.5% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged at 5.25% to 5.50% in January, while 14.5% are expecting a 25 basis point cut. But that changes in March, with the central bank widely expected to cut, with another expected in May. 

In other economic reports just before the Christmas holiday weekend, consumer sentiment for December surged amid improving inflation and durable goods orders for November climbed. 

Economic data will be sparse this holiday week, but weekly initial jobless claims come out Thursday, along with wholesale inventories and pending home sales for November. 

Front-month silver futures slipped 0.7% Tuesday to settle at $24.40 an ounce on Comex. The March contract increased 1% last week. Silver is down 4.9% this month after advancing 12% in November and increasing 2.2% in October. It’s up 1.5% in 2023. The March contract is currently up $0.009 (+0.04%) an ounce to $24.405 and the DG spot price is $24.23.

Spot palladium fell 2.2% Tuesday to $1,197.50 an ounce after slipping 0.5% last week. Palladium is up 16% in December after losing 9.5% in November and dropping 10% in October. Palladium has plummeted 34% so far this year. Currently, the DG spot price is down $4.40 an ounce to $1190.00.

Spot platinum gained 0.4% Tuesday to $986.40 an ounce after rising 3.9% last week. Platinum is up 5.4% in December after falling 0.7% in November and gaining 3.5% in October. Platinum is down 7.8% in 2023. The DG spot price is currently down $3.50 an ounce to $981.10.

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