Gold slumps from near an all-time high early Monday as the dollar strengthened ahead of the Fed meeting. The yellow metal also under pressure as the stock market experiences major sell off on news of China’s startup DeepSeek that is being touted as a competitive AI model for a fraction of the cost.
The Dow Jones fell 200 points, or 0.4% on the news of this AI competitor, while the Nasdaq lost 3.4%, and the S&P 500 dropped 1.9%.
Investors were waiting guidance from the Federal Reserve following this week’s policy meeting on the path for monetary policy for the rest of the year. The central bank is almost unanimously expected to keep interest rates unchanged Wednesday. High interest rates are considered bearish for gold, while low rates and rate cuts are bullish.
Gold prices remained elevated as investors sought a hedge against geopolitical and economic uncertainty from U.S. President Donald Trump’s new policies on tariffs, trade and immigration. The Trump administration began concerted immigration enforcement activities over the weekend, resulting in the arrests of almost 1,000 people. Separately, Trump backed off trade threats against Colombia after the country agreed to accept flights of U.S. deportees.
Front-month gold futures rose 2.1% last week to $2,806.60 an ounce on Comex after the most-active contract rolled to April from February. The April contract gained 0.5% Friday. Bullion is up 6.3% this month after dropping 1.5% in December and losing 2.5% in November. The metal gained 27% in 2024, its biggest annual gain since 2010. The February contract is currently down $24.90 (-0.90%) an ounce to $2754.00 and the DG spot price is $2751.80.
In economic news, U.S. consumer confidence data is due out Tuesday, followed by the Fed’s rate decision Wednesday.
The Fed cut rates three times last year, but most investors aren’t pricing in another rate reduction until June, according to investors tracked by the CME FedWatch Tool, because of stubbornly high inflation.
The Fed reduced its benchmark interest rate in September, November and December. It’s now at 4.25% to 4.50%. Previously, the central bank had kept rates at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to combat inflation.
The Fed’s favorite inflation measure, the personal consumption expenditures price index, comes out Friday, two days after the Fed’s monetary policy announcement.
Canada also has a rate decision coming out Wednesday, followed by the European Central Bank on Thursday.
Front-month silver futures edged up 0.1% last week to $31.19 an ounce on Comex, and the most-active March contract rallied 1.1% Friday. Silver is up 6.6% this month after dropping 6% in December and falling 5.1% in November. It gained 21% in 2024. The March contract is currently down $0.460 (-1.48%) an ounce to $30.725 and the DG spot price is $30.43.
Spot palladium gained 4.3% last week to $1,002.00 an ounce, though it fell 1.5% Friday. Palladium is up 7.9% after falling 6.7% in December and sliding 12% in November. Palladium dropped 17% last year. The current DG spot price is down $32.20 an ounce to $974.50.
Spot platinum added 0.3% last week to $953.30 an ounce but fell 0.5% Friday. Platinum is up 4.4% this month after losing 4.6% in December and declining 4.2% in November. Platinum slid 8.4% in 2024. The DG spot price is currently down $8.50 an ounce to $958.50.
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