Gold waned early Monday as the dollar strengthened against the euro on political tensions that may topple the government flared in France.
The U.S. dollar’s rally against other currencies makes dollar-denominated gold more expensive for holders of other currencies and is therefore bearish for the yellow metal. Investors were also taking profits amid gold’s recent rallies and a ceasefire last week between Israel and Hezbollah that reduced gold’s attractiveness as haven asset.
Investors will be turning their attention this week to the release of the U.S. November jobs report at the end of the week for signals on monetary policy and the health of the economy. The Federal Reserve has said it closely watches both inflation and jobs data when determining monetary policy.
Front-month gold futures dropped 2.1% last week to settle at $2,681.00 an ounce on Comex, though the most-active February contract rose 0.6% Friday. Comex trades on Thursday settled Friday because of the U.S. Thanksgiving Day holiday. Bullion dropped 2.5% last month after rising 3.4% in October and gaining 5.2% in September. The metal is up 29% in 2024. The February contract is currently down $11.80 (-0.44%) an ounce to $2669.20 and the DG spot price is $2645.60.
The Fed’s favorite inflation measure, the personal consumption expenditures index, came out just before last week’s holiday and showed that inflation rose in line with expectations in October. The 12-month rate was 2.3% and the monthly increase was 0.2%. The Fed has a 2% inflation target, and the October headline number was higher than September’s 2.1%. Excluding volatile food and energy, core inflation increased 2.8% year on year and 0.3% month on month.
In addition to the PCE, U.S. consumer spending data came out October and remained solid, though it declined a bit from September. Third-quarter GDP data, which also came out Wednesday, showed a 2.8% annual expansion, though the figure was slower than the 3% April-June rate in Commerce Department data.
Fed policymakers voted unanimously at November’s meeting to cut interest rates by 25 basis points to 4.50% to 4.75%. The central bank also cut rates in September. Before those reductions, the Fed had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022. The Fed began raising rates during the pandemic to combat surging inflation. Interest rates cuts are typically bullish for gold, which becomes a more attractive investment.
About two-thirds of the investors tracked by the CME FedWatch Tool are betting that the Fed will cut rates by another 25 basis points in December, ending the year at 4.25% to 4.50%. The rest expect the central bank to keep rates unchanged next month.
In France, far-right leader Marine Le Pen threatened to support a no-confidence motion against the prime minister unless he adjusts his 2025 budget to index pensions to inflation and other requests. The government has said it won’t accept artificial deadlines.
Front-month silver futures lost 2.1% last week to $31.11 an ounce on Comex, though the most-active March contract increased 1.8% Friday. Silver fell 5.2% in November after advancing 4.3% in October and rallying 7.9% in September. It’s up 29% in 2024. The March contract is currently down $0.078 (-0.25%) an ounce to $31.030 and the DG spot price is $30.56.
Spot palladium slid 3.1% last week to $995.00 an ounce, though it gained 0.9% Friday. Palladium decreased 12% last month after increasing 11% in October and gaining 3.2% in September. Palladium is down 11% this year. The current DG spot price is down $0.50 an ounce to $949.20.
Spot platinum dropped 1.7% last week to $956.70 an ounce, though it rallied 2.3% Friday. Platinum declined 4.2% in November after rising 1.5% in October and increasing 5.6% in September. Platinum is down 4.1% this year. The DG spot price is currently down $6.50 an ounce to $949.60.
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