Gold briefly rose in early Friday trading but looks headed for second weekly drop as the prospect of large interest-rate cuts outweigh economic concerns with investors.
In two days of testimony before congressional committees, Federal Reserve Chairman Jerome Powell reiterated his “unconditional” commitment to battling inflation with tools including sizeable interest rate increases. He acknowledged that such moves could increase unemployment and even trigger a recession.
The remarks added to strength in the dollar that has pressured gold futures. A stronger dollar makes gold more expensive for holders of other currencies and pressures the yellow metal. Interest rates in and of themselves are bearish for bullion, though a recession would be likely to attract some haven investors.
August gold futures fell 0.5% Thursday to settle at $1,829.80 an ounce on Comex. The front-month contract is down 0.6% so far this week. There was no settlement Monday for precious metals trading on Comex because of the Juneteenth U.S. holiday. Gold tumbled 3.3% in May, its worst month since September. It retreated 3.5% in 2021. Currently, the August contract is down $4.70 (-0.26%) an ounce to $1,825.10 and the DG spot price is $1,820.10.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.81% Thursday to 1,063.07 metric tons, Reuters reported.
The Federal Reserve announced its biggest rate increase since 1994 last week to combat the highest U.S. inflation in 40 years.
Most economists and investors now expect Fed policymakers to announce a series of sizeable interest-rate increases through the end of the year. About 93.3% of investors now expect another 75-basis-point increase in July, according to the CME’s FedWatch Tool. None anticipated a move of that size a month ago. Last week’s decision was the third rate hike of 2022. The 50-basis-point increase in May was the largest in 22 years at that time.
Fed Governor Michelle Bowman said Thursday that she supports a 75-basis-point increase next month and rates of at least 50 points after that until inflation cools. Governor Christopher Waller said Saturday that he would support another 75-basis-point increase in July, and other officials have said such a move is worth discussing. St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly are scheduled to give remarks Friday.
The central bank’s increasingly aggressive posture comes after the consumer price index for May indicated that inflation hadn’t peaked in March, as many economists had forecast.
Meanwhile, the yellow metal also continued to get some support from uncertainty over the pandemic and the ongoing war in Ukraine.
September silver futures decreased 1.9% Thursday to settle at $21.09 an ounce on Comex. The front-month contract slid 2.7% so far this week. Silver dropped 6.1% in May after losing 8.2% in April. It retreated 12% in 2021. Silver prices are tied to industrial demand. The July contract is down $0.252 (-1.20%) an ounce to $20.790 and the DG spot price is $20.73.
Spot palladium fell 0.9% Thursday to $1,875.50 an ounce. It’s up 1.4% so far this week. The metal lost 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. Currently, the DG spot price is up $13.90 an ounce to $1888.00.
Spot platinum tumbled 2.3% Thursday to $915.00 an ounce. It retreated 2.8% so far this week. It gained 2.3% last month and lost 9.4% last year. The DG spot price is slightly down $1.50 an ounce to $915.90.
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