Gold claws back above the $2600 benchmark on this morning’s inflation data, but still looks headed for a weekly loss after the Fed signaled in its Wednesday meeting that the it wouldn’t cut interest rates as many times as had previously been expected in 2025.
The personal consumption expenditures price (PCE) index for November showed an increase of just 0.1% from the preceding month. That’s a 2.4% inflation rate on an annual basis, still slightly ahead of the Fed’s 2% goal, but much lower than the 2.5% Dow Jones estimate for November. The PCE index is the Fed’s favorite inflation measure.
Front-month gold futures fell 1.7% Thursday to settle at $2,608.10 an ounce on Comex, and the most-active February contract slid 2.5% in the first four days of the week. Bullion dropped 2.5% last month after rising 3.4% in October and gaining 5.2% in September. The metal is up 26% in 2024. The February contract is currently up $25.40 (+0.97%) an ounce to $2633.50 and the DG spot price is $2622.40.
Equities tumbled Wednesday after the Fed’s decision to reduce its benchmark interest rate to 4.25% to 4.50%. They reduced interest rates by a widely expected 25 basis points Wednesday in the third rate cut this year. Rate cuts are typically considered bullish for gold, making the yellow metal a more attractive alternate investment. So a slowdown or halt to rate reductions would be bearish.
The Fed raised its inflationary outlook and policymakers are only likely to cut rates twice more in 2025, according to market speculation.
Fed Chairman Jerome Powell said the decision was “a closer call” than previous ones, “but we decided it was the right call.”
Before rate cuts in September, November and now December, 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.
“We have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Powell said in his news conference Wednesday. “We can therefore be more cautious as we consider further adjustments to our policy rate.”
More than 89% of the investors tracked by the CME FedWatch Tool are now betting that the Fed will keep rates unchanged in January. The rest expect another 25 basis point cut.
Front-month silver futures lost 4.3% Thursday to $29.41 an ounce on Comex, and the most-active March contract declined 5.2% in the first four days of the week. Silver fell 5.2% in November after advancing 4.3% in October and rallying 7.9% in September. It’s up 22% in 2024. The March contract is currently up $0.234 (+0.80%) an ounce to $29.645 and the DG spot price is $29.37.
Spot palladium decreased 1.9% Thursday to $922.00 an ounce and tumbled 4.5% so far this week. Palladium declined 12% last month after increasing 11% in October and gaining 3.2% in September. Palladium is down 17% this year. Currently, the DG spot price is up $3.80 an ounce to $927.00.
Spot platinum slid 1% Thursday to $929.50 an ounce and is unchanged so far this week. Platinum declined 4.2% in November after rising 1.5% in October and increasing 5.6% in September. Platinum is down 6.8% this year. The DG spot price is currently up $8.50 an ounce to $936.00.
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