Gold was steady Monday after tumbling Friday on strength in the dollar after an interest-rate hike from the Federal Reserve. The yellow metal firming on the easing dollar and global economic worries.
The dollar index traded near its highest level in two decades, making gold more expensive for holders of other currencies and pressuring the yellow metal. Liquidity was expected to be low Monday because the U.S. federal government, stock market and bond market were closed for the Juneteenth holiday. There was also no settlement Monday for precious metals trading on Comex.
The Fed announced its biggest rate increase since 1994 last week to combat the highest U.S. inflation in 40 years. Rate increases are typically bearish for gold, but inflation is bullish, because gold is considered a haven against the higher cost of goods and services.
August gold futures fell 1.9% last week to settle at $1,840.60 an ounce on Comex, and the most-active contract slipped 0.5% Friday. Gold dropped 3.3% in May, its worst month since September. It retreated 3.5% in 2021. The August contract is currently up $2.00 (+0.11%) an ounce to $1,840.40 and the DG spot price is $1,841.10.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 1.1% to 1,075.54 metric tons Friday from 1,063.94 metric tons Thursday, Reuters reported.
Fed policymakers announced a 75-basis-point interest-rate increase Wednesday, bigger than the 50-basis-point one that they had indicated they would announce a few weeks earlier. The more aggressive posture came after the release of the consumer price index report for May the week before, which indicated that inflation hadn’t peaked in March, as many economists had forecast.
About 92.1% of investors now expect another 75-basis-point increase in July, according to the CME’s FedWatch Tool, compared with 9.5% who anticipated a move of that size a week ago. Last week’s decision was the third rate hike of 2022. The 50-basis-point increase in May was the largest in 22 years at that time.
Investors continue to fear an economic slowdown because of the high inflation rate. U.S. industrial production for May came in Friday at a softer-than-expected rate, according to data released by the Fed, the latest indication that the economy may be moving toward a recession.
Economic uncertainty is usually bullish for gold, which also continued to get some support from the pandemic and the ongoing war in Ukraine.
September silver futures decreased 1.1% last week to settle at $21.68 an ounce on Comex, after the front-month contract – which rolled to September last week – dropped 1.3% Friday. Silver dropped 6.1% in May after losing 8.2% in April. It retreated 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently up $0.033 (+0.15%) an ounce to $21.620 and the DG spot price is $21.67
Spot palladium dropped more than 5% last week. The metal lost 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. The DG spot price is currently up $46.30 an ounce to $1,890.00.
Spot platinum retreated more than 4% last week. It gained 2.3% last month and lost 9.4% last year. Currently, the DG spot price for platinum is up $7.20 an ounce to $946.40.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.