Gold came under pressure as Israel and Iran refrained from escalating their conflict following tit-for-tat air strikes last week. The prospect of high interest rates is also typically bearish for gold, making it a less attractive alternate investment to things like Treasurys and the dollar, which have been gaining.
Investors await the release of the Fed’s favorite inflation measure at the end of the week for further direction. The personal consumption expenditures price index comes out Friday with March data and is expected to confirm that inflation has remained stubbornly high.
Front-month gold futures gained 1.7% last week to settle at $2,413.80 an ounce on Comex after the most-active June contract advanced 0.7% Friday. Bullion is up 7.8% this month after rising 8.9% in March – the biggest monthly gain in more than three years – and dropping 0.6% in February. The metal rose 13% in 2023. The June contract is currently down $66.90 (-2.77%) an ounce to $2346.90 and the DG spot price is $2338.80.
Gold has also gotten a boost this year from “unrelenting Chinese demand” from retail shoppers, fund investors, futures traders and the central bank, Bloomberg reported.
But recent inflation reports topped investors’ forecasts, rather than declining toward the Fed’s 2% goal.
The PCE expected to have slightly accelerated to 2.6% on an annual basis amid rising energy costs. So-called core PCE, which excludes volatile food and energy prices, probably rose 0.3% from the prior month, similar to February’s gain.
The Fed closely watches both labor market conditions and inflation when determining monetary policy.
About 96.3% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep rates unchanged in May, while 3.7% expect a 25 basis point cut. The central bank has raised interest rates by 5.25 percentage points since March 2022 in an effort to cut inflation, but kept rates unchanged at 5.25% to 5.50% at its meeting last month. While 83% of investors expect the Fed to hold rates at current levels in June, and more than half anticipate rates holding steady in July. Most investors are now anticipating a rate cut in September.
In other economic news this week, U.S. GDP data, wholesale inventories and weekly initial jobless claims data are due out Thursday. Personal income and spending and University of Michigan consumer spending is due Friday.
Front-month silver futures, which rolled to July from May last week, increased 2.8% last week to settle at $29.13 an ounce on Comex after the July contract rallied 1.6% Friday. Silver is up 17% in April after gaining 8.9% in March and losing 1.2% in February. It ticked up 0.2% in 2023. The July contract is currently down $1.678 (-5.76%) an ounce to $27.45 and the spot price is $27.37.
Spot palladium decreased 3.7% last week to $1,030.00 an ounce after dropping 0.9% Friday. Palladium is up 0.2% this month after advancing 7.7% in March and falling 4.6% in February. Palladium plummeted 38% last year. Currently, the spot price is down $12.40 an ounce to $1019.00.
Spot platinum lost 5.4% last week to $938.60 an ounce after slipping 1.1% Friday. Platinum is up 2.7% in April after rising 3.3% in March and decreasing 4.9% in February. Platinum dropped 6.8% in 2023. The spot price is currently down $13.20 an ounce to $925.60.
