Gold Remains Flat as Traders Await Fed’s Next Move

It was a rather uneventful week for the precious metals market as new economic data revealed that inflation continues to cool in the US economy. The Core PCE report, the Fed’s preferred measure of inflation, came in 2.9% higher than last December. Consensus analyst forecasts showed a rise of 3.0% was expected, indicating that inflation is cooling faster than we think. Despite this, the odds of an interest rate cut in March continue to fall, with all signs pointing to the first cut coming in the second half of the year. 

We likely won’t see much movement in the precious metals markets until the next FOMC rate decision at the end of the month. Even so, Fed members continued their hawkish rhetoric this week which is one of the main reasons that the odds of a March cut are fading.

Gold continued to trade within a tight range and held the $2,000 price level despite taking a strong dip midweek. The COMEX February 2024 futures contracts settled the week at $2,018.20. Part of the pressure on gold so far this year has been from a stronger-than-expected start from the US dollar. 

Silver prices edged higher from the start of the week and COMEX March 2024 futures contracts for silver managed to settle at $22.90 after a modest loss on Friday. Platinum futures were trading higher this week with a strong closing gain of 3.04% during Friday’s trading session. Finally, palladium also added more than 2.0% on Friday after a volatile week of trading. Both platinum and palladium enjoyed one of their strongest weeks of the year after what has been an otherwise slow start for the two metals. 

Precious Metals Stocks and ETFs 

The gold mining sector reading (MIGL) saw a negative percentage change of about -2.57% on Friday to close out what was an otherwise positive week for gold mining stocks. Barrick Gold (NYSE: GOLD) returned 0.78% this week while Agnico Eagle Mines (NYSE: AEM) added 1.06%. 

Equally as bullish was a 2.6% return from the VanEck Gold Miners ETF (NYSEARCA: GDX) and a 2.0% return from the VanEck Junior Gold Miners ETF (NYSEARCA: GDXJ). 

What’s in Store Next Week for Precious Metals?

All eyes will be on the FOMC rate decision which is set to take place at the meeting being held on January 30th and 31st. Any indication of a potential rate hike in March due to the lower-than-expected core PCE reading this week would be bullish for gold and other precious metals. In any case, most analysts are now in the boat that the Fed is likely to take a less dovish stance on rates, especially as it tries to balance lingering inflation with a very resilient US economy. 

Of course, many are still watching to see how things unfold in the Middle East with the various geopolitical events currently ongoing. The region is a high producer of gold and silver as well as other metals like iron, copper, and zinc. Any further disruption in production or transportation of metals and any other supplies could have a direct impact on the prices of these commodities. 

Following the FOMC meeting, we jump right back into fresh January economic data. The first of which will be the January Nonfarms payroll report which will provide a look at how hot the employment market is.