Gold futures are currently trading lower by $10.40 or a decline of 0.51%. This is a larger percentage decline than gains witnessed in the dollar today. Because gold is paired against the dollar, there is a 100% inverse correlation between dollar strength or weakness and gold prices rising or falling.

After Friday’s price decline which can now be interpreted as a possible one-off, gold prices have firmed for the first two trading days of the week. With the holiday season beginning in just a few days, we can anticipate lower volume begin to come in to the markets. Although gold futures traded to a lower low and a lower high yesterday, the net result was a gain of $7.40.

After trading to a high of $2059.60 today, gold futures closed lower. As of 4:20 PM, gold futures basis the most active February 2024 contract is down $17.90 or 0.87% and fixed at $2033.40. Today’s selloff follows two days of strong gains that occurred immediately after the conclusion of this month’s FOMC meeting.

A dovish pivot is the best way to describe yesterday’s Fed statement and Chairman Powell’s press conference from the last FOMC meeting of the year. Typically, when deciphering “Fed speak” investors look for nuances and word choices for insight into the internal thinking of Federal Reserve members’ comments.

The Federal Reserve concluded its last FOMC meeting of the year, and as expected, they kept their benchmark interest rate unchanged. They also released an updated economic forecast in its Summary of Economic Projections (SEP).

Two important events that will shape the economic fabric occurred today. The November CPI was released by the BLS this morning, and the last FOMC meeting of the year began today.

The U.S. Bureau of Labor Statistics released the latest information on inflation vis-à-vis the November Consumer Price Index report. 

Gold prices plunged this week, giving up almost $75 per ounce. This occurred after hitting the highest value on record when gold traded to approximately $2153 on Monday, only to close over $100 below the new record high at $2048. Although two out of the five trading days this week resulted in gains (Wednesday and Thursday), these gains were tepid at best.

Market participants are beginning to lighten their trading activities as the holiday season unfolds. We can expect to see volume decline as traders begin to square their books at the end of the year. Lower holiday volume can increase volatility, as it takes smaller positions to move the market.

Analysts and market participants are overwhelmingly optimistic that the Federal Reserve has ended its quantitative tightening (QT) cycle, which included aggressive rate hikes. This series of QT began in March 2022. Currently, the Fed’s benchmark rate is between 5 ¼% and 5 ½%.

Gold futures basis, the most active February 2024 contract closed at $2091.70 on Friday, December 1. This after gold gained $35.60 or 1.73% opening at $2056.56 with a strong volume of 230,000 contracts. This would be the highest close for the February contract of gold futures. Trading would not resume until Australia’s open Monday morning, (Sunday in the United States).