Gold made a recovery earlier today as the dollar’s momentum slowed, but it remains on track for a quarterly decline, with speculations revolving around the Federal Reserve’s commitment to maintaining high-interest rates. The recent inflation data provided a slight boost to the gold market.
The Commerce Department reported a 0.1% increase in the Personal Consumption Expenditures (PCE) price index, excluding food and energy, for the month, falling short of the projected 0.2% gain. The annual core PCE increase of 3.9% aligned with expectations. Consumer spending, measured in current dollars, rose by 0.4%, a significant drop from the 0.9% recorded in July. Following this news, the PGS spot price surged by more than $7 per ounce.
Investors are now keeping a close eye on the upcoming monthly U.S. jobs report, a key indicator closely monitored by the Fed. Its release is scheduled for next week, barring any disruptions due to a potential U.S. government shutdown.
The ongoing stalemate among lawmakers regarding legislation to fund the U.S. government beyond October 1, the start of the federal fiscal year, lent support to gold as a traditional hedge against uncertainty. As of early Friday, there seems to be no clear resolution to avoid a government shutdown.
Front-month gold futures experienced a 0.7% decline on Thursday, settling at $1,878.60 per ounce on Comex. The December contract has seen a 3.4% decrease this week. Gold’s performance in September shows a 4.4% decline, following a 2.2% drop in August and a 4.1% increase in July. Year-to-date, gold has risen by 2.9%. The December contract currently stands at $1893.30, up $15.70 (+0.84%) per ounce, while the PGS spot price is at $1876.40.
Gold has been hovering near its six-month lows due to expectations of prolonged high-interest rates aimed at curbing inflation. This speculation has also driven the dollar and U.S. Treasury yields toward their strongest quarterly performance in four quarters, both of which typically have a bearish effect on gold prices.
According to the CME FedWatch Tool, approximately 86.7% of investors anticipate that the Federal Reserve will maintain its federal funds rate without change in November. Only 13.3% expect a 25 basis point rate hike. A similar outlook prevails for the December meeting, with most investors predicting the Fed will keep rates steady. Since March 2022, the Fed has implemented a total rate hike of 5.25 percentage points in its efforts to combat inflation. The central bank maintained its benchmark interest rate at a range of 5.25% to 5.50% in September, and any indication of a halt or pause in rate hikes is generally seen as bullish for gold.
Front-month silver futures saw a slight increase of 1.7 cents on Thursday, settling at $23.74 per ounce on Comex. However, the December contract has declined by 4.6% for the week. Silver has experienced an 8.4% decrease this month after a marginal 0.6% gain in August and an 8.5% increase in July. Year-to-date, silver is down by 5.4%. The December contract currently stands at $23.640, up $0.899 (+3.95%) per ounce, while the PGS spot price is at $23.39.
Spot palladium, on the other hand, surged by 4.7% on Thursday, reaching $1,290.50 per ounce, with a 1.6% increase for the week. Palladium has enjoyed a 5.1% gain this month following a 5.3% decline in August and a 3.6% rise in July. However, palladium has experienced a substantial 29% drop since the beginning of the year. The current PGS spot price is up by $0.50 per ounce, at $1289.00.
Spot platinum witnessed a 2.8% increase on Thursday, reaching $915.60 per ounce, though it has incurred a 2.2% loss for the week. Platinum is down by 6.1% this month, after a 1.7% gain in August and a 5.2% increase in July. In total, platinum has experienced a 14% decrease in 2023. The PGS spot price currently stands at $927.70, reflecting a $14.50 per ounce increase.
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