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28-05-2024
NEW YORK: Gold prices ticked up on Monday, as investors assessed diminishing bets of US interest rate cuts ahead of a key inflation report due later in the week.
Spot gold was up 0.5% to $2,344.46 per ounce as of 0936 GMT US gold futures also climbed 0.5% to $2,345.60.
Bullion hit a record high of $2,449.89 last week, but has shed more than $100 since then. “Gold has suffered from more hawkish perceived comments from Fed officials and better-than-expected US economic data, with market participants shifting again back the timing of the first Fed rate cut,” UBS analyst Giovanni Staunovo said.
Federal Reserve officials indicated that it would likely take longer than anticipated for inflation to fall to 2%, the minutes of its latest policy meeting showed last week.
Fed Governor Christopher Waller said on Friday it’s possible that a key underlying interest rate that influences the potency of monetary policy may rise in the future after years of declines, but it’s too soon to say if that will happen.
While gold is often considered a safeguard against inflation, higher rates increase the opportunity cost of holding the non-yielding asset.
Investors are now waiting for the personal consumption expenditures (PCE) price index, the US central bank’s preferred inflation gauge, which is due on Friday.
Traders are currently pricing in a roughly 61% chance that the Fed will cut rates in November, according to the CME FedWatch tool, opens new tab, compared to about a 63% chance on Friday.
“We expect gold prices to stay volatile, and price setbacks to be shallow, targeting gold prices to test new record highs later this year,” Staunovo added.
Spot silver rose 1.5% to $30.80. It hit an 11-year high last week.
“Silver has outperformed gold this year, and this trend is likely to continue,” Staunovo said.
Platinum climbed about 3% to $1,056.60 and palladium gained around 2% to $982.69.
Federal Reserve officials at their last policy meeting said they still had faith that price pressures would ease at least slowly in coming months, but doubts emerged about whether the current level of interest rates was high enough to guarantee that outcome and “various” officials said they’d be willing to hike borrowing costs again if inflation surged.
That meeting was held before data showed the pace of consumer price increases beginning to cool again in April, yet reflected what US central bank officials since then have said is increased uncertainty about the path of inflation and monetary policy.
“Participants … noted that they continued to expect that inflation would return to 2% over the medium term,” according to the minutes of the April 30-May 1 meeting but “the disinflation would likely take longer than previously thought.”
While the policy response for now would “involve maintaining” the Fed’s benchmark policy rate in the current 5.25%-5.50% range, “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” the minutes said, employing a modifier not included in the usual set of words like some, many and most used in the minutes to give a sense of how many officials voiced a particular opinion.
Fed Chair Jerome Powell and other policymakers have since said they feel further rate hikes are unlikely but the minutes released on Wednesday excluded specific reference to that notion and to the likelihood of rate cuts this year.
The March 19-20 meeting minutes said that participants had “judged that the policy rate was likely at its peak for this tightening cycle. (Int’l Monitoring Desk)
