Gold drops on strong dollar and the pressure from higher interest rates. The yellow metal is also under pressure from India’s new, much higher import duty on gold. The bullion looks headed for a third weekly decline.
India, the world’s second biggest bullion consumer, has raised its basic import duty on gold to 12.5% from 7.5% in an effort to bring down the trade deficit.
Inflation remained high in May, according to the Federal Reserve’s favorite measure, though there were signs that it started to ease, data released Thursday showed.
The high costs of goods and services has spurred moves by the Fed to raise interest rates. The central bank is widely expected to boost interest rates by 75 basis points again at its July meeting after announcing a 75-basis-point rate increase, its biggest since 1994, in June.
Investors will also be looking to the release of key first-of-the-month manufacturing data Friday amid fears that the Fed’s actions to rein in inflation will trigger an economic recession.
August gold futures fell 0.6% Thursday to settle at $1,807.30 an ounce on Comex, and the front-month contract retreated 1.3% in the first four days of the week. Gold dropped 2.2% in June after tumbling 3.3% in May, its worst month since September. It retreated 3.5% in 2021. The August contract is currently down $13.50 (-0.75%) an ounce to $1,793.80 and the DG spot price is $1,799.50.
U.S. consumer spending fell in May, and prior months were revised lower, possibly indicating the economy is weaker than it was, according to data released Thursday. The U.S. core personal consumption expenditures price index, the Fed’s favorite inflation gauge, rose 0.6% from the month before and was up 6.3% from May 2021, data from the Commerce Department showed.
The dollar strengthen came as U.S. equities capped the worst first half of a year since 1970. Steep declines in the stock market can boost risk-off assets like the dollar, Treasurys and gold, but most of the current trade is going into the other assets. And higher interest rates and bond yields raise the opportunity cost of holding gold.
September silver futures decreased 1.9% Thursday to settle at $20.35 an ounce on Comex, and the front-month contract dropped 3.8% in the first four days of the week. Silver declined 6.2% in June after falling 6.1% in May and 8.2% in April. It retreated 12% in 2021. Silver prices are tied to industrial demand. The September contract is currently down $0.812 (3.99%) an ounce to $19.540 and the DG spot price is $19.76.
Spot palladium dropped 1.3% Thursday to $1,964.00 an ounce, though it gained 3% in the first four days of the week. It fell 2.9% in June after losing 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. Currently, the DG spot price is down $5.60 an ounce to $1,960.60.
Spot platinum retreated 1.4% Thursday to $909.40 an ounce and is down 0.9% so far this week. It decreased 7.2% in June after gaining 2.3% in May and losing 9.4% last year. The DG spot price is currently down $39.00 an ounce to $877.30.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.