Gold futures () opened Monday at $4,228.10 per troy ounce, down 0.4% from Friday’s closing price of $4,243. The price of gold fell at the start of the session.
The US central bank’s steering committee will meet Tuesday and Wednesday to confirm or adjust interest rates. Analysts and investors widely expect a quarter-point rate cut. CME FedWatch currently estimates with an 89.6% probability that the Fed will lower its target rate to a range of 3.50% to 3.75% from the current range of 3.75% to 4%.
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Lower interest rates reduce borrowing costs for businesses and consumers, which can encourage spending, stimulate the economy and raise prices. There are some concerns about cutting rates while inflation remains above the Fed’s long-term goal of 2%. The latest PCE inflation report showed prices rose 2.8% in September, compared to 2.6% in June and July.
Lower interest rates also reduce cash returns, making gold more attractive in comparison.
The opening price of gold futures on Monday was 0.4% lower than Friday’s closing price. Here’s a look at how gold’s opening price has changed over the past week, month and year:
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A week ago: +0.2%
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A month ago: +6.2%
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A year ago: +61.4%
As of November 14, gold’s one-year gain was 63.4%.
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Learn more: Gold vs. Crypto: What Should Investors Own in a Depreciation Trade?
The price of gold can be quoted in several forms because the precious metal is traded in different ways. The two main gold prices that investors should be aware of are spot prices and gold futures prices.
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The spot price of gold is the current market price per ounce for physical gold as a commodity, sometimes called spot gold. Gold ETFs backed by physical gold assets generally track the spot price of gold.
The spot price is lower than what you would pay to buy gold coins, bars or jewelry because your total price will include a markup called a gold premium that covers refining, marketing, dealer overhead and profit. The spot price is more like a wholesale price, and the spot price plus the gold premium makes up the retail price.
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Gold futures are contracts that mandate a transaction in gold at a specific price on a future date. These contracts are exchange-traded and more liquid than physical gold. They are paid on or before the expiry date of the contract, either financially or by delivery. A financial cash settlement involves paying in cash the profit or loss of the contract. Delivery means the seller sends physical gold to the buyer at the contract price.
Supply and demand determine gold spot prices and gold futures prices. Factors that influence the supply and demand of gold include:
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Geopolitical events
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Central Bank Buying Trends
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Inflation
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Interest rate
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Mining production
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Whether you’ve been tracking the price of gold for the last month or last year, the gold price chart below shows the steady rise in the value of the precious metal.
