Gold steady in Monday trading, balanced between two pressures: a stronger dollar making the yellow metal a less attractive alternate investment and the outlook for Federal Reserve interest rate cuts and geopolitical risk which offer gold support.
The U.S. dollar extended gains from a two-month high reached last week. A stronger dollar makes gold more costly to holders of other currencies and discourages investment. But expectations of additional Fed interest rate cuts this year and haven demand from the conflicts in the Middle East kept bullion prices high.
Front-month gold futures rose 0.3% last week to settle at $2,676.30 an ounce on Comex after the most-active December contract increased 1.4% Friday. 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 down $3.60 (-0.13%) an ounce to $2672.70 and the DG spot price is $2662.20.
The U.S. producer price index September came in flat in data released Friday, and the year-on-year gain was the smallest in seven months at 1.8%. Core PPI rose 0.1% for the month and 3.2% year on year. The minimal growth in inflation bolsters the case for an additional Fed interest rate cut next month.
The Fed has said it closely watches both labor market and inflation data when determining monetary policy. A bigger Fed rate cut would be bullish for gold, while holding rates at or near current high levels might be seen as bearish.
The central bank lowered interest rates by 50 basis points last month to 4.75% to 5.00%. The Fed 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.
Most investors tracked by the CME FedWatch Tool expect the Fed to cut rates again in November, with 81.26% 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.
A series of Fed officials are scheduled to speak this week and are likely to provide further direction. They include Fed Governors Christopher Waller on Monday and Adriana Kugler on Tuesday.
Separately, the Pentagon announced Sunday that it’s sending an advanced missile defense system to Israel, along with about 100 American service members to operate it, in the latest escalation in the conflict in the region.
Front-month silver futures decreased 2% last week to $31.76 an ounce on Comex, though the December advanced rallied 1.7% Friday. 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 down $0.325 (-1.02%) an ounce to $31.430 and the DG spot price is $31.55.
Spot palladium rose 6.3% last week to $1,075.00 an ounce, and though it fell 0.7% Friday. Palladium gained 3.2% in September after increasing 3.2% in August and decreasing 4.3% in July. Palladium plummeted 38% last year. Currently, the DG spot price is down $24.80 an ounce to $1053.00.
Spot platinum slid 0.5% last week to $990.50 an ounce but rose 1.7% Friday. 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 $10.20 an ounce to $1001.60.
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