Gold poised for biggest slump in five weeks on hawkish comments from the Federal Reserve that energized treasury yields and the dollar.
Fed Chairman Jerome Powell said Thursday that an interest rate increase of 50 basis points “will be on the table” for the May meeting. The comments, at an IMF-hosted panel, were considered his most aggressive on monetary policy to date as the central bank works to combat a 40-year high in inflation. Powell also foreshadowed the possibility of another 50 basis-point hike in July, noting that many officials the March meting had indicated that “one or more” rate increases of that size could be appropriate.
Benchmark 10-year Treasury yields strengthened, limiting gold’s appeal as an alternate investment.
Front-month gold futures fell 0.4% Thursday to settle at $1,948.20 an ounce on Comex. The June contract decreased 1.4% in the first four days of the week. 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 $1.90 (-0.10%) an ounce to $1,946.30 and the DG spot price is $1,935.40.
In addition to Powell’s comments, remarks this week by St. Louis Fed President James Bullard introduced the possibility of a 75 basis-point increase if needed. Nomura Holdings Inc. issued a forecast late Thursday that the Fed will raise rates by 75 basis points at both its June and July meetings after a 50 basis-point hike in May. The Fed announced a 25-basis-point rate increase in March, its first in years.
The Fed’s actions are being spurred by a U.S. inflation report last week 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.
In other economic news, U.S. weekly initial jobless claims reached 184,000 last week, just above analysts’ expectations, amid a tight jobs market, Labor Department data Thursday showed.
Meanwhile, Russia continued to add to its troops inside Ukraine as President Joe Biden announced Thursday that the U.S. will send an additional $800 million in military assistance to the embattled country. Also adding to geopolitical uncertainty was COVID-19-realted lockdowns in Shanghai, which is trying to eliminate community spread of the virus.
Front-month silver futures dropped 2.6% Thursday to settle at $24.70 an ounce on Comex, and the July futures contract declined 4.2% in the first four days of the week. 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 $0.191 (-0.78%) an ounce to $24.430 and the DG spot price is $24.39.
Spot palladium fell 3.5% Thursday to $2,417.00 an ounce, though it increased 1.3% in the first four 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 dropped 8.5% in March after gaining 5.3% in February. It gained 20% in the first quarter and retreated 22% in 2021. Currently, the DG spot price is down $9.20 an ounce to $2,451.00.
Spot platinum decreased 1.5% Thursday to $979.50 an ounce and is down 2% so far this week. 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. The DG spot price is off $35.10 an ounce to $944.70.
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