Gold gains early Wednesday, edging up on weaker equities, and Treasury bond yields, making gold a more attractive alternate asset for investors.
Markets were awaiting additional data for signals on the health of the U.S. economy and for indicators on the Federal Reserve’s interest rate cut timeline. U.S. retail sales data for September come out Thursday, along with September industrial production data and weekly initial jobless claims data.
Front-month gold futures rose 0.5% Tuesday to settle at $2,678.90 an ounce on Comex, and the most-active December contract increased 0.1% in the first two days of the week. Bullion gained 5.2% last month after advancing 2.2% in August and increasing 5.7% in July, its biggest monthly gain since March. The metal rose 13% in 2023. The December contract is currently up $19.2 (+0.72%) an ounce to $2698.10 and the DG spot price is $2676.90.
San Francisco Fed President Mary Daly said Tuesday that another interest rate cut or two would still be the “reasonable thing to do” before the end of the year. She spoke during a question and answer session following a speech in New York. Separately, Atlanta Fed President Raphael Bostic said he’s penciled in just one more rate cut this year – of 25 basis points.
The Fed lowered interest rates by 50 basis points last month to 4.75% to 5.00%. It had kept them at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation. A bigger Fed rate cut would be bullish for gold, while holding rates at or near current high levels might be seen as bearish.
Most investors tracked by the CME FedWatch Tool expect the Fed to cut rates again in November, with 96.3% anticipating a 25 basis point reduction. The rest are betting on the Fed to hold rates unchanged. The central bank has two scheduled policy meetings left this year. Most investors tracked by the tool are expecting rates to end the year at 4.25% to 4.50%.
Fed Governor Adriana Kugler on Tuesday made the case for additional interest rate cuts if inflation keeps easing and emphasized that the central bank wants to avoid a slowdown in the labor market. Her comments followed those of Fed Governor Christopher Waller on Monday, who sounded a note of caution about the speed of rate cuts:
“The data is signaling that the economy may not be slowing as much as desired,” Waller said in prepared remarks at a conference at Stanford University. He cited recent reports on the labor market, inflation, GDP and income. The Fed has said it closely watches both labor market and inflation data when determining monetary policy.
Meanwhile, increased geopolitical risk surrounding the conflicts in the Middle East kept bullion prices high. U.S. officials said Tuesday that they sent a letter to the Israeli government on Sunday warning of a possible cutoff of U.S. military aid if Israel fails to increase humanitarian aid to Gaza. Israel continued to bombard Gaza and Lebanon and warned of possible upcoming military actions against Iran.
Front-month silver futures increased 1.4% Tuesday to $31.76 an ounce on Comex. The December contract was flat so far this week. Silver rallied 7.9% in September after gaining 0.7% in August and dropping 2.1% in July. It ticked up 0.2% in 2023. The December contract is currently up $0.559 (+1.76%) an ounce to $32.315 and the DG spot price is $32.07.
Spot palladium fell 1.5% Tuesday to $1,024.00 an ounce, and it dropped 4.7% so far this week. Palladium gained 3.2% in September after increasing 3.2% in August and decreasing 4.3% in July. Palladium plummeted 38% last year. The current DG spot price is up $11.60 an ounce to $1031.50.
Spot platinum slid 0.7% Tuesday to $993.60 an ounce but rose 0.3% in the first two days of the week. Platinum increased 5.6% last month after sliding 5.2% in August and losing 2.1% in July. Platinum dropped 6.8% in 2023. The DG spot price is currently up $10.90 an ounce to $1003.50.
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