Gold futures () opened at $4,084.40 an ounce on Monday, down 0.2% from Friday’s close of $4,094.20. The price of gold was down at the start of the session.
Weak gold prices coincide with increased uncertainty about the Fed’s next interest rate decision. The steering committee will meet Dec. 9-10 to decide whether a third rate cut this year is warranted. The decision will not be easy, given the factors at play and the delay in the release of economic reports caused by the government shutdown.
Before the shutdown, inflation remained above the Fed’s 2% target and employment data showed a weakening labor market. Rising prices and rising unemployment are difficult to manage simultaneously, and Fed committee members were not aligned on the best path forward. The lag in economic data complicates the situation. Currently, analysts put the chance of a quarter-point rate cut in December at 44.6%, according to CME FedWatch. A month ago, the probability was 93.7%.
Persistently high interest rates can suppress demand for gold because the precious metal does not earn interest.
The opening price of gold futures on Monday is up 0.2% from Friday’s close. 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: +0.6%
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A month ago: -6.2%
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A year ago: +59.2%
As of Friday, gold’s one-year gain was 63.4%.
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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.
