Gold Pressured by Dollar, Yields

Gold Pressured by Dollar, Yields

Gold pressured by steadying U.S. dollar and firmer yields, but supported by economic fears stemming from lawmakers’ standoff over the U.S. debt ceiling. The bullion is digging in above the $2,000 an ounce line.

The U.S. dollar rose 0.2%, its highest point in more than a week, on track for its biggest weekly climb since February. While the benchmark 10-year U.S. treasury yields were higher on the day, they are set for a third weekly drop.

Investors are also speculating on a pause in interest rate hikes from the Federal Reserve after the produce price index data released Thursday and the consumer price index data released Wednesday showed both slowed to the slowest rate in two years. 

June gold futures fell 0.8% Thursday to settle at $2,020.50 an ounce on Comex, and the front-month contract decreased 0.2% in the first four days of the week. Bullion increased 0.6% in April after gaining 8.1% in March. The metal fell $2.40 in 2022. The June contract is currently down $2.40 (-0.12%) an ounce to $2018.10 and the DG spot price is $2015.20.

A meeting between U.S. President Joe Biden and congressional leaders that was supposed to be held Friday was postponed until next week, with staff talks expected to continue through the weekend. Biden warned Wednesday that if lawmakers don’t move quickly to raise the country’s $31.4 trillion debt ceiling, it could throw the country into a recession and cost thousands of jobs. 

Gold often attracts haven investors during times of economic uncertainty. Investors are also watching developments in the U.S. banking crisis

Separately, the latest inflation report is likely to influence the Fed’s next move on interest rates. Central bank policymakers have indicated that they consider labor market conditions and inflation data when making monetary policy decisions. If inflation remains seemingly under control, the Fed is more likely to pause a series of interest rate hikes.

The CPI rose by 4.9% for the 12 months ended in April, slightly slower than the 5% print in March, according to released Wednesday by the Bureau of Labor Statistics. The figure was lower than the 5% analysts had forecast. The CPI has slowed for 10 consecutive months.  So-called core inflation – excluding food and energy costs – was unchanged at 5.5% for the annual period. On a monthly basis, both headline and core inflation increased 0.4%, matching economists’ estimates. 

Wholesale prices rose just 0.2% in April, Thursday’s data showed, less than the 0.3% forecast by economists. Excluding food and energy, core PPI also rose 0.2%, in line with expectations. 

About 90.4% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep interest rates unchanged at the next meeting in June, while 9.6% expect another 25 basis point rate hike. The Fed raised rates by another 25 basis points last week. Higher interest rates are typically bearish for gold, because they make the yellow metal less attractive as an alternate investment, but a pause or an end to the rate hikes would be bullish.

The Fed has raised rates by 25 basis points three times this year following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022. The federal funds rate is currently at 5.00% to 5.25%. 

July silver futures dropped 4.8% Thursday to settle at $24.42 an ounce on Comex, and the front-month contract is down 5.8% in the first four days of the week. Silver gained 4.4% in April after increasing 15% in March. It rose 3% in 2022. The July contract is currently down $0.279 (-1.14%) an ounce to $24.145 and the DG spot price is $24.08.

Spot palladium decreased 2.6% Thursday to $1,583.00 an ounce and is up 3.8% so far this week. Palladium rose 2% last month after rising 3.7% in March. Palladium lost 5.7% in 2022. The current DG spot price is down $1.50 an ounce to $1575.50.

Spot platinum lost 1.3% Thursday to $1,103.00 an ounce, and it advanced 3.3% in the first four days of the week. Platinum added 8.5% in April after increasing 3.7% in March. Platinum surged 10% in 2022. The DG spot price is currently down $11.50 to $1093.10.

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