Gold Clinging Above $1800

Gold Clinging Above $1800

Gold clinging above the $1800-an-ounce threshold after dipping briefly below that psychological barrier in early trading, under pressure from dominant dollar. The yellow metal is little changed near three-month lows.

Lower U.S. Treasury yields provided a floor for gold prices, though the yellow metal continued to come under pressure from an aggressive monetary policy and a 20-year high in the dollar.

Investors are increasingly turning to the dollar as a risk-off trade amid fears that a series of planned interest-rate cuts by the Federal Reserve to stem inflation will crimp economic growth. Cleveland Fed President Loretta Mester said Friday that she backed half-point interest rate increases again in June and July, following one earlier this month.

Front-month gold futures fell 4% last week to settle at $1,808.20 an ounce on Comex, the lowest closing price for a most-active contract since Feb. 4. The June contract decreased 0.9% Friday. Gold retreated 2.2% in April, its worst month since September, and 3.5% in 2021. Currently, the June contract is currently down $3.40 (-0.19%) an ounce to $1,804.80.

The strong dollar is pressuring gold, because it makes the precious metal, which is priced in dollars, more expensive for holders of other currencies. Gold is a traditional hedge against inflation, but so are the dollar and Treasurys, which have gotten most of the buying since the Fed unveiled its bullish monetary policy. The central bank announced its biggest rate increase in more than 22 years earlier this month, raising interest rates by half a percentage point.

The vast majority of investors expect the Fed to raise rates another half percentage point to a range of 1.5% to 1.75% at policymakers’ next scheduled meeting in June, according to the CME’s FedWatch Tool.

In the Fed’s crosshairs are 40-year highs in inflation. The consumer price index increased 8.3% in April from a year earlier, though the pace was slightly slower than the March rate, a report last week showed.

But economic uncertainty, the war in Ukraine and the coronavirus pandemic kept gold prices supported.

In economic news this week, investors will be watching Tuesday for the release of U.S. retail sales data for April and the NAHB home builders’ index for May. Wednesday will bring data on U.S. housing starts for April. On Thursday, scheduled releases include weekly initial jobless claims, the Philadelphia Fed’s manufacturing index, existing home sales data and the index of leading economic indicators.

Front-month silver futures tumbled 6.1% last week to settle at $21.00 an ounce on Comex. The July futures contract advanced 1.1% Friday. Silver lost 8.2% in April, its worst monthly performance since September. It fell 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently up $0.291 (+1.39%) an ounce to $21.275.

Spot palladium decreased 5.3% last week to $1,966.50 an ounce, though it rose 1.5% Friday. Palladium touched a record $3,440.76 in March. Russia produces about 40% of the world’s palladium, and Russia’s Nornickel is the world’s largest supplier of palladium. The metal advanced 2.6% in April after declining 8.5% in March. It retreated 22% in 2021. Currently, the DG spot price is up $54.80 an ounce to $2,022.50.

Spot platinum tumbled 2.5% last week to $947.60 an ounce after falling 0.5% Friday. The metal dropped 4.4% last month after declining 4.2% in March. It lost 9.4% last year. The current DG spot price is down $6.30 an ounce to $948.30.


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