Gold lifts on weaker dollar

Gold lifts on weaker dollar

Gold lifts a tad on weaker dollar, but still headed for a weekly drop early Friday after the Federal Reserve indicated that additional interest rate hikes may be in the cards.

The U.S. central bank left the benchmark federal funds rate at 5.00% to 5.25% Wednesday, its first pause after 10 consecutive rate increases to combat inflation. But at a news conference after the rate decision, Chairman Jerome Powell said that “nearly all” of the Fed’s policymakers “expect that it will be appropriate to raise interest rates somewhat further by the end of the year.” 

The prospect of additional rate increases is bearish for gold, making the yellow metal less attractive than other financial assets. But the fact that the Fed held rates unchanged this time is neutral or slightly bullish. 

Consumer sentiment data are due out Friday from the University of Michigan and may provide investors with further direction.

August gold futures rose $1.80 Thursday to settle at $1,970.70 an ounce on Comex, but fell to a three-month low in intraday trading. The front-month contract dropped 0.3% in the first four days of the week. Bullion retreated 0.9% in May after increasing 0.6% in April and 8.1% in March. The metal fell $2.40 in 2022. The August contract is currently up $2.50 (+0.13%) an ounce to $1973.20 and the DG spot price is $1960.20.

Fed policymakers indicated Wednesday that they will closely track “a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments” when determining future monetary policy. 

U.S. applications for unemployment benefits for last week came in unchanged at 262,000 Thursday. The data from the Labor Department showed that weekly initial jobless claims held at the highest level since October 2021, in a sign of some weakness in the labor market.

The U.S. consumer price index rose at the lowest annual rate in two years last month, separate data showed Tuesday. CPI rose 4% last month, compared with a year earlier, the smallest increase since March 2021. It gained 0.1% from April. Both figures were in line with economists’ estimates. But so-called core CPI, the index excluding volatile food and energy prices, wasn’t as rosy, with gains of 5.3% from a year earlier and 0.4% from a month earlier. 

About 74.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will raise interest rates by 25 basis points at its July monetary policy meeting, while 25.6% expect it to keep rates unchanged.

The Fed has increased rates by 25 basis points three times this year following hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022 and smaller increases in March and May of last year. The rate hikes have totaled 5 percentage points since March 2022.

Meanwhile, the European Central Bank raised rates by 25 basis points on Thursday to the highest level in 22 years, while the Bank of Japan held steady Friday.

July silver futures dropped 0.7% Thursday to settle at $23.95 an ounce on Comex, and the front-month contract tumbled 1.9% in the first four days of the week. Silver decreased 6.5% in May after gaining 4.4% in April and 15% in March. It rose 3% in 2022. The July contract is currently up $0.208 (+0.87%) an ounce to $24.155 and the DG spot price is $24.11

Spot palladium decreased $1 Thursday to $1,415.50 an ounce, though it’s up 5.4% so far this week. Palladium fell 9.3% last month after rising 2% in April and 3.7% in March. Palladium lost 5.7% in 2022. Currently, the DG spot price is up $4.20 an ounce to $1421.50.

Spot platinum gained 1.3% Thursday to $996.00 an ounce, though it’s down 2.3% so far this week. Platinum retreated 7.4% in May after adding 8.5% in April and 3.7% in March. Platinum surged 10% in 2022. The current DG spot price is down $3.70 an ounce to $992.20.

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