Gold powers to a new record with spot prices hitting $2,110.80 an ounce early Monday amid haven demand linked to the war between Israel and Hamas and speculation that the Federal Reserve will begin cutting interest rates next year. The yellow metal then receded below the $2,100 on profit taking.
The Fed speculation has dampened demand for the dollar, which is bolstering gold prices. The Fed’s favorite inflation report, the personal consumption expenditures price index, came in in line with expectations last week, adding to expectations that the Fed’s rate-hike cycle is ending. Investors will be awaiting Friday’s release of the key monthly U.S. jobs report for November for further direction.
Front-month gold futures gained 3.3% last week to settle at $2,089.70 an ounce on Comex after the February contract increased 1.6% Friday. Bullion rose 3.2% last month after gaining 6.9% in October and falling 5.1% in September. The metal is up 14% in 2023. The March contract is currently down $23.10 (-1.11%) an ounce to $2066.60 and the DG spot price is $2050.10.
Israel has launched a ground assault into southern Gaza, the BBC reported, citing information from Israeli army radio. Gold is a traditional hedge against geopolitical and economic uncertainty, so the escalation in the Middle East is likely bullish for gold.
Lower interest rates are also bullish for the yellow metal, making it a more attractive asset for investors. Subsequent weakening in the dollar also makes gold more affordable to holders of other currencies.
The Fed has boosted interest rates by 5.25 percentage points since March 2022 to curb inflation to the 2% level. The Fed kept interest rates unchanged at 5.25% to 5.50% in November. The CME FedWatch Tool shows that 99.7% of the investors it tracks are betting that the Fed will keep its federal funds rate unchanged Dec. 13, while .3% are expecting a 25 basis point decrease. More than half of the investors tracked by the tool are betting on a rate cut in March, though the Fed is widely expected to hold rates unchanged in January.
Front-month silver futures increased 4.7% last week to settle at $25.86 an ounce on Comex, after the March contract rallied 0.8% Friday. Silver advanced 12% in November after increasing 2.2% in October and decreasing 9.5% in September. It’s up 7.6% in 2023. The March contract is currently down $0.502 (-1.94%) an ounce to $25.355 and the DG spot price is $25.03.
Spot palladium fell 6.3% last week to $1,015.50 an ounce after dropping 1.3% Friday. Palladium lost 9.5% last month after dropping 10% in October and rising 3% in September. Palladium has plummeted 44% so far this year. Currently, the DG spot price is down $28.40 an ounce to $992.00.
Spot platinum retreated 0.2% last week to $936.70 an ounce, though it edged up 60 cents Friday. Platinum fell 0.7% in November after gaining 3.5% in October and declining 6.6% in September. Platinum is down 12% in 2023. The DG spot price is currently down $4.60 an ounce to $933.50.
