As markets evaluate the Fed's interest rate outlook, gold prices remain flat

25 Sep 2023 , 11:11 AM

After just eking out a 0.1% gain the previous week, gold held steady on Monday as investors evaluated the U.S. Federal Reserve members’ warning of additional interest rate hikes ahead of a consumer inflation index anticipated later this week.

Spot gold was largely constant at $1,924.54 per ounce, while U.S. gold futures were down 0.1% at $1,944.30.

The benchmark 10-year Treasury yields were close to their 16-year top, and the dollar was trading around a more than six-month high.

Even after voting to keep the benchmark rate unchanged last week, Fed officials warned on Friday of additional rate increases, with three policymakers stating they are still unsure the fight against inflation is won.

Non-interest-paying bullion, which is priced in dollars, is less appealing to purchase at higher interest rates.

A survey released on Friday revealed little change in U.S. company activity in September, while a different survey revealed the euro zone economy is expected to fall this quarter and won’t soon resume recovery.

The Federal Reserve’s favoured inflation indicator, the personal consumption expenditures (PCE) price index, is released on September 29.

Investors will also be keeping an eye on developments in Washington, where American legislators are negotiating a funding measure with a Sept. 30 deadline to avoid a potential government shutdown. 

On Friday, the Bank of Japan maintained its commitment to bringing inflation steadily to its 2% objective as well as its record-low interest rates.

In the seven days leading up to September 20, U.S. stock funds had significant withdrawals as a result of concerns over an extended restrictive monetary policy.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings plummeted on Friday to their lowest level since January 2020.

The price of spot silver increased by 0.1% to $23.55 per ounce, while platinum decreased by 0.2% to $924.78 and palladium increased by 0.2% to $1,251.35.

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