In a significant turn of events, gold futures faced a downward trajectory on Tuesday, September 12, driven by a strengthening dollar and apprehensions regarding the Federal Reserve’s interest rate policy. As investors closely monitor the release of US inflation data later this week, all eyes are on the indicators that may shed light on the direction of the Federal Reserve’s (Fed) interest rates.
Gold Futures Under Pressure
Gold futures experienced a decline of $12.10, marking a 0.62% drop, ultimately closing at $1,935.10 per ounce. The precious metal’s allure diminished as the dollar surged, negatively affecting gold contracts priced in the greenback. Such dynamics make gold less appealing to investors holding other currencies.
In contrast, silver futures managed a minor gain, rising by 1.90 cents, or 0.08%, to conclude at $23.402 per ounce. Platinum futures exhibited a more pronounced uptick, climbing by $10.50, or 1.16%, to finish at $912.80 per ounce. Palladium futures also fared well, rising by $26.10, equaling a 2.1% increase, ultimately settling at $1,245.30 per ounce.
The Strong Dollar Impact
The dollar index, measuring the dollar’s performance against six major currencies, saw a 0.14% increase, reaching 104.7119 overnight. This strengthening dollar put downward pressure on gold contracts denominated in dollars, making them appear less attractive to investors using alternative currencies.
Fed’s Interest Rate Speculation
Apart from the dollar’s influence, the market faces uncertainty surrounding the Federal Reserve’s potential interest rate hike at its November meeting. According to the latest data from CME Group’s FedWatch Tool, investors assign a 93% probability that the Fed will maintain interest rates at the 5.25-5.50% range during the September 19-20 meeting. However, this confidence wanes for the November meeting, with only a 56% likelihood of the Fed keeping interest rates steady.
Inflation Data on the Radar
Investors are closely monitoring the release of the Consumer Price Index (CPI) for August in the United States today, September 13, and the Producer Price Index (PPI) for August tomorrow, September 14. These inflation figures come just ahead of the Fed’s monetary policy meeting scheduled for September 19-20.
Analysts anticipate that the headline CPI, which includes food and energy, will exhibit a 3.6% year-on-year increase in August, following a 3.2% rise in July. Meanwhile, the core CPI, which excludes food and energy, is expected to surge by 4.3% year-on-year in August, after a 4.7% increase in July. These inflation numbers will play a crucial role in shaping the Fed’s monetary policy decisions in the near future.
In conclusion, the gold market’s recent performance reflects the impact of a robust dollar and growing concerns about potential interest rate adjustments by the Federal Reserve. With inflation data being closely watched, the coming days will provide more clarity on the precious metals landscape and the broader financial markets.
The Spot Market is Open
Wednesday, September 13, 2023