Gold drops on strong dollar, trading at the lowest level in four weeks early Monday, briefly dipping below $1,900 an ounce. The looming U.S. rate hike is always weighing on the precious metal.
The dollar was near a two-year high in anticipation that the Federal Reserve will accelerate tightening monetary policy to combat 40-year highs in inflation. Almost all investors expect the Fed to raise interest rates to a range of 0.75% to 1% at the bank’s early May meeting, according to the CME’s FedWatch Tool. The Fed increased rates by a quarter percentage point to 0.25% to 0.5% in March, in the first rate hike since 2018.
Fed Chairman Jerome Powell said Thursday that an interest rate increase of 50 basis points “will be on the table” for the May meeting and that another could follow in July. The Fed’s actions are driven by a U.S. inflation report earlier this month that showed consumer prices jumped by 8.5% in March, the most in 16.5 years, taking it to the fastest pace in more than 40 years.
Front-month gold futures fell 2.1% last week to settle at $1,934.30 an ounce on Comex. The June contract decreased 0.7% Friday. Gold advanced 2.8% in March after gaining 5.8% in February. It rose 6.9% in the first quarter and retreated 3.5% in 2021. The June contract is currently down $31.00 (-1.60%) an ounce to $1,903.30 and the DG spot price is $1,900.80
The precious metal was bolstered, however, by the escalating conflict in Ukraine and the ongoing coronavirus pandemic, because gold is s traditional hedge against uncertainty.
U.S. Secretary of State Antony Blinken and Defense Secretary Lloyd Austin arrived in Ukraine on Sunday to meet with Ukrainian President Volodymyr Zelenskyy, who is pressing them for more powerful weapons to combat Russia. The conflict is considered the biggest European crisis since World War II.
Meanwhile, China locked down parts of Beijing, adding to closures in Shanghai, to prevent a wider COVID-19 outbreak.
In economic news this week, the April consumer confidence index is due out Tuesday, followed by U.S. first-quarter GDP and initial jobless claims Thursday.
Front-month silver futures dropped 5.7% last week to settle at $24.32 an ounce on Comex, and the July futures contract declined 1.6% Friday. Silver gained 3.1% in March after surging 8.8% in February. It rose 7.6% in the first quarter after falling 12% in 2021. Silver prices are tied to industrial demand. The May contract is currently down $0.539 (-2.22%) an ounce to $23.720 and the DG spot price is $23.69
Spot palladium rose 1.3% last week to $2,416.50 an ounce, though it decreased 50 cents 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 dropped 8.5% in March after gaining 5.3% in February. It gained 20% in the first quarter and retreated 22% in 2021. Palladium has had a rough trading day, the DG spot price is currently off $275.30 an ounce to $2,141.00.
Spot platinum dropped 6.1% last week to $938.80 an ounce and fell 4.2% Friday. The metal retreated 4.2% in March after advancing 1.7% in February. It increased 2.9% in the first quarter after dropping 9.4% last year. Currently, the DG spot price is down $22.00 an ounce to $921.30.
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