Gold Slips as Dollar Advances

Gold Slips as Dollar Advances

Gold slips as dollar advances early Monday and investors sought profits after the yellow metal advanced for a fourth consecutive week last week. The bullion was further suppressed by a downbeat economic report out of China.

July was a tough month for China. Retail sales in July grew by 2.7% from a year ago per the National Bureau of Statistics. That number is far from the 5% growth forecast by a Reuters poll, it’s also down from growth of 3.1% in June.

Anticipation of further interest rate hikes from the Federal Reserve elevated the U.S. currency and kept a damper on gold prices, which typically fall when rates and the dollar rise.

Front-month gold futures rose 1.4% last week to settle at $1,815.50 an ounce on Comex, after the December contract increased 0.5% Friday. Bullion dropped 1.4% in July after falling 2.2% in June and 3.3% in May, its worst month since September. The metal retreated 3.5% in 2021. Currently, the December contract is down $22.70 (-1.27%) an ounce to $1782.30 and the DG spot price is $1779.10.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fun, fell 0.15% Friday to 995.97 metric tons, their lowest level since January, Reuters reported.

The consumer price index report for July, released last week, continued to temper investors’ expectations that the Fed will raise rates by another 75 basis points at policymakers’ next meeting in September. The CPI was flat in July after a 1.3% increase in June, and the inflation rate in the 12 months to July slipped to 8.5% from a 41-year high of 9.1% in June.

The Fed raised rates by 75 basis points in June and July. Some investors were betting on another big move, but indications that inflation may have peaked have reduced those expectations.

Investors are now betting there’s a 55.5% chance of a 50-basis-point rate hike in September, with just 44.5% projecting a 75-basis-point increase, according the CME FedWatch Tool. A week ago, 68% of investors anticipated a 75-basis-point hike, with just 32% predicting a 50-point one.

Investors will be closely awaiting Wednesday’s release of the minutes of the last meeting of Fed policymakers for indications on members’ thinking about future rate increases. Fed Governor Michelle Bowman is also scheduled to speak Wednesday. Kansas City Fed President Esther George will speak Thursday and Richmond Fed President Tom Barkin on Friday.

In other economic news, the Empire State manufacturing report and the NAHB home builders’ index come out Monday, industrial production Tuesday, retail sales Wednesday and initial jobless claims and the index of leading economic indicators Thursday.

Investors will also be keeping an eye on developments regarding the war in Ukraine, the pandemic, and Taiwan, all issues which have triggered uncertainty that has been bullish for gold.

Front-month silver futures rallied 5.1% last week to settle at $20.85 an ounce on Comex as the most-active contract rolled to December from September. The December contract rallied 1.7% Friday. Silver slipped 0.8% in July after declining 6.2% in June and falling 6.1% in May. It retreated 12% in 2021. Silver prices are tied to industrial demand. The September contract is currently down $0.593 (-2.87%) an ounce to $20.105 and the DG spot price is $20.23.

Spot palladium gained 4.2% last week $2,248.50 an ounce, though it fell 2.6% Friday. Palladium rose 9.9% in July after losing 2.9% in June and 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. Currently, the DG spot price is off by $71.40 an ounce to $2168.00

Spot platinum advanced 3.3% last week to $969.20 an ounce after rising 0.3% Friday. Platinum retreated 0.3% in July after losing 7.2% in June. It dropped 9.4% last year. The DG spot price is currently down $32.30 an ounce to $937.10.


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