Gold Slips On Muscular Dollar

Gold Slips On Muscular Dollar

Gold slips early Friday, headed for its fourth consecutive weekly decline on muscular dollar. The currency flexing its strongest power in two decades pressured the yellow metal which briefly dropped below $1,800 this morning as bearish traders took the lead.

Investors are increasingly turning to the U.S. dollar as a risk-off trade amid fears that a series of planned interest-rate cuts by the Federal Reserve to stem inflation will crimp economic growth. The rising value of the currency is pressuring dollar-denominated gold because it makes the precious metal more expensive for holders of other currencies.

Federal Reserve Chairman Jerome Powell acknowledged Thursday that reining in inflation — returning it to 2% —  could cause some economic pain, but it’s his top priority.

 “So it will be challenging; it won’t be easy,” he said in an interview with Marketplace. No one here thinks that it will be easy. Nonetheless, we think there are pathways … for us to get there.”

The stock markets are attempting to clawing their way back this morning with the Dow opening over 200 points up and the S&P 500 adding 1%. On Wednesday, the S&P and Dow dropped 0.1% and 0.3%, respectively with the S&P closing down more than 18% from its all-time high. The Dow dropped for six straight trading sessions.

Front-month gold futures fell 1.6% Thursday to settle at $1,824.60 an ounce on Comex, the lowest closing price for a most-active contract since Feb. 7. The June contract decreased 3.1% in the first four days of the week. Gold retreated 2.2% in April, its worst month since September, and 3.5% in 2021. Currently, the June contract is down $21.90 (-1.20%) an ounce to $1,802.70 and the DG spot price is $1,806.00.

Inflation remained near 40-year highs in April, a report from the Bureau of Labor Statistics showed Wednesday. The consumer price index increased 8.3% in April from a year earlier, higher than a Dow Jones estimate of 8.1%. That’s slightly slower than the March level.

Gold is a traditional hedge against inflation but has taken a back seat to other risk-off assets this year, including the dollar and Treasurys. Their strength has pressured the yellow metal — and so has the Fed’s interest-rate increases. The central bank announced its biggest rate increase in more than 22 years last week, raising interest rates by half a percentage point. It was the second rate hike this year.

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.

Economic uncertainty, the war in Ukraine and the coronavirus pandemic kept a floor under gold prices.

Front-month silver futures tumbled 3.7% Thursday to settle at $20.77 an ounce on Comex. The July futures contract retreated 7.1% in the first four 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 $0.233 (-1.12%) an ounce to $20.540 and the DG spot price is $20.75.

Spot palladium decreased 5.8% Thursday to $1,938.00 an ounce, and it’s down 6.7% so far this 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. The DG spot price is up a solid $62.40 an ounce to $1,973.00.

Spot platinum tumbled 5.7% Tuesday to $952.30 an ounce and retreated 2.1% in the first four days of the week. The metal fell 4.4% last month after dropping 4.2% in March. It lost 9.4% last year. The DG spot price is down $4.20 an ounce to $946.20.


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