(Bloomberg) — Gold advanced as investors digested weaker-than-expected US data on manufacturing and job openings while awaiting a Federal Reserve meeting where officials are expected to signal their rate-cut plan remains on hold.
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US manufacturing activity contracted in April, while input prices rose at the fastest pace since inflation peaked in 2022. Job openings fell to the lowest level in three years. Treasury yields pared losses after the readings, helping lift bullion by as much as 1.1%.
Still, Fed officials are poised to keep rates steady for a sixth consecutive meeting and signal no plans for cuts in the near future after higher-than-expected inflation. The rate decision, and a possible announcement on the pace of its balance-sheet reduction program, will be released at 2 p.m. in Washington. Chair Jerome Powell will hold a press conference 30 minutes later.
Higher rates are typically negative for gold as bullion doesn’t pay interest.
Palladium prices dropped below platinum for the first time since February, as the precious metal’s long-standing premium is eroded by a pessimistic outlook for demand in gasoline-powered cars.
Palladium prices reached a record in 2022. Those higher costs pushed automakers to substitute palladium with its cheaper cousin platinum, narrowing the spread between the two metals.
At the same time, platinum has been supported by a projected market deficit and optimism about demand for plug-in hybrid cars, which require higher loads of platinum-group metals than their internal combustion engine equivalents.
Substitution between the two precious metals could stall if the premium palladium has typically commanded remains minimal. More fundamentally, both metals face an existential threat from the increasing spread of electric vehicles, which don’t require catalytic converters to filter exhaust fumes.
Palladium is more exposed to that threat, with automakers making up 80% of demand for the precious metal, compared with 40% for platinum, according to figures from the World Platinum Council. That leaves palladium with a “dire long-term prognosis,” said Rhona O’Connell, head of market analysis at StoneX Financial Ltd.
Platinum rose 1.9% to $955.60 an ounce at 10:09 a.m. in New York, while palladium slipped by 0.9% to $947.20 an ounce. Gold rose 0.8% to $2,305.27 an ounce, while silver climbed 0.6%. The Bloomberg Dollar Spot Index was down 0.1%.
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