Gold falls as dollar strengthens

Gold falls as dollar strengthens

Gold falls as dollar strengthens early Friday, making the yellow metal more expensive to holders of other currencies.

Economic reports, including U.S. weekly initial jobless claims and manufacturing activity from the Philadelphia area, reinforced speculation that the Federal Reserve is likely to pause interest rate increases after another hike in May. Higher interest rates are typically bearish for gold, because they make the yellow metal less attractive as an alternate investment, so a pause in the rate hikes would be considered bullish.

June gold futures rose 0.6% Thursday to settle at $2,019.10 an ounce on Comex, and the front-month contract is up 0.2% so far this week. Bullion gained 8.1% last month after decreasing 5.6% in February, its worst performance since June 2021. Gold increased 8.8% in the first quarter. The metal fell $2.40 in 2022. Currently, the June contract is down $18.4 (-0.91%) an ounce to $2000.7 and the DG spot price is $1989.00.

New applications for U.S. unemployment benefits edged higher last week, and recurring claims jumped to the highest level since November 2021, both indications that the labor market is slowing. The jobs market is one of the indicators that Fed officials have said they’re watching along with inflation when determining the size and pace of rate hikes. 

The Philadelphia Fed manufacturing index unexpectedly plunged, data released Thursday showed.

Outlooks from Fed officials Thursday were mixed. Cleveland Fed Loretta Mester said in a speech that the central bank still has more rate hikes to go to curb high inflation. Atlanta Fed President Raphael Bostic confirmed he was still a “one and done” proponent on rate hikes in remarks in Florida. 

About 81.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at the central bank’s next policy meeting in May, while just 18.6% anticipate the central bank will leave rates unchanged. Fed policymakers have said they track both inflation and labor market statistics when determining monetary policy. 

The Fed has raised rates by 25 basis points twice this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. The federal funds rate is currently at 4.75% to 5.00%. 

Silver July futures gained 0.5 cent Thursday to settle at $25.60 an ounce on Comex, though the front-month contract, which rolled to July from May this week, gained 0.5% in the first four days of the week. Silver increased 15% in March after retreating 12% in February. It edged up 0.5% in the first quarter. It rose 3% in 2022. The May contract is currently down $0.088 (-0.35%) an ounce to $25.285 and the DG spot price is $25.30.

Spot palladium decreased 1.5% Thursday to $1,608.00 an ounce and is up 6.4% so far this week. Palladium rose 3.7% in March after plummeting 14% in February. It fell 17% last quarter. Palladium lost 5.7% in 2022. Currently, the DG spot price is up $40.30 an ounce to $1649.00.

Spot platinum gained 0.3% Thursday to $1,103.20 an ounce and added 5.3% in the first four days of the week. Platinum increased 3.7% last month after falling 5.9% in February. It dropped 6.6% in the first quarter. Platinum surged 10% in 2022. The DG spot price is currently up $31.40 an ounce to $1132.70.

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