Gold traded near three-and-a-half-month lows early Wednesday on a strong dollar and expectations of a continued aggressive monetary policy stance from the Federal Reserve.
The U.S. currency is at 20-year highs, making dollar-denominated gold a more expensive investment for holders of other currencies. Investors are increasingly turning to the dollar as a risk-off trade amid fears that a series of Fed-planned interest-rate cuts to stem inflation will crimp economic growth.
Gold shrugged off this morning’s economic data from the Commerce Department. Construction of new U.S. homes fell 0.2% in April, it’s the second straight monthly drop. Housing starts are still 14.6% above the same month a year earlier.
Fed Chairman Jerome Powell said Tuesday that the central bank won’t hesitate to keep raising interest rates until 40-year highs in inflation come down.
“If that involves moving past broadly understood levels of neutral, we won’t hesitate to do that,” he told The Wall Street Journal. “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down.”
The vast majority of investors expect the Fed to raise rates another half percentage point to a range of 1.5% to 1.75% at policymakers’ next scheduled meeting in June, according to the CME’s FedWatch Tool. It increased benchmark rates by half a percentage point earlier this month, in the second rate hike of 2022 and the largest in 22 years. Rate increases are typically considered bearish for gold.
Front-month gold futures rose 0.3% Tuesday to settle at $1,818.90 an ounce on Comex, just above the lowest level since February. The June contract increased 0.6% in the first two days of the week. Gold retreated 2.2% in April, its worst month since September, and 3.5% in 2021. The current June contract is down $6.40 (-0.35%) an ounce to $1,812.50.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.4% Tuesday to 1,049.21 metric tons in its ninth consecutive decline, according to Reuters.
In economic news, on Thursday, scheduled releases include weekly initial jobless claims, the Philadelphia Fed’s manufacturing index, existing home sales data and the index of leading economic indicators.
Front-month silver futures gained 0.9% Tuesday to settle at $21.75 an ounce on Comex. The July futures contract advanced 3.6% in the first two days of the week. Silver lost 8.2% in April, its worst monthly performance since September. It fell 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently down $0.175 (-0.81%) an ounce to $21.545 and the DG spot price is $21.55.
Spot palladium increased 1.3% Tuesday to $2,070.00 an ounce, and it’s up 5.3% in the first two days of the week. 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 advanced 2.6% in April after declining 8.5% in March. It retreated 22% in 2021. Currently, the DG spot price is slightly up, $2.80 an ounce, to $2,085.00.
Spot platinum jumped 1.7% Tuesday to $966.10 an ounce and is up 2% so far this week. The metal dropped 4.4% last month after declining 4.2% in March. It lost 9.4% last year. The DG spot price is currently down $8.40 an ounce to $957.00.
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