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 fell in early trading.
Low gold prices coincide with increased uncertainty about the Federal Reserve’s next move on interest rates. The policymaking committee will meet Dec. 9-10 to decide whether a third rate cut is warranted this year. The decision will not be easy, given the factors at play and the delay in economic reporting caused by the government shutdown.
Before the shutdown, inflation remained above the Federal Reserve’s 2% target and employment data showed a weakened labor market. Rising prices and higher unemployment are difficult to manage simultaneously, and members of the Federal Reserve committee were not aligned on the best path forward. The delay in economic data complicates the situation. Analysts currently estimate a 44.6% chance of a quarter-point rate cut in December, according to CME FedWatch. A month ago, the probability was 93.7%.
The persistence of high interest rates can suppress demand for gold, because the precious metal does not pay interest.
The opening price of gold futures on Monday is up 0.2% compared to Friday’s close. Below is how the opening price of gold has changed compared to 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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One year ago: +59.2%
Last Friday, gold’s annual gain was 63.4%.
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The price of gold can be quoted in multiple ways 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 gold spot price is the current market price per ounce of physical gold as a commodity, sometimes called spot gold. Gold ETFs that are 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, as your total price will include a margin called the 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 is the retail price.
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Gold futures are contracts that call for a transaction in gold at a specific price at a future date. These contracts are traded on the exchange and are more liquid than physical gold. They are settled on or before the contract expiration date, either economically or by delivery. A cash settlement involves paying the contract profit or loss in cash. Delivery means that the seller sends physical gold to the buyer for the contracted 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 purchasing trends
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Inflation
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Interest rates
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Mining production
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Whether you are following the price of gold from last month or last year, the gold price chart below shows the constant rise in value of the precious metal.