Gold Tumbles Ahead of Fed Meeting

Gold Tumbles Ahead of Fed Meeting

Gold tumbles early Monday as bond yields strengthened ahead of this week’s Fed meeting when the Federal Reserve members are expected to announce an aggressive interest rate increase to combat 40-year highs in inflation.

Almost all investors expect the Fed to raise interest rates to a range of 0.75% to 1% at the bank’s May 4 meeting, according to the CME’s FedWatch Tool. The Fed boosted rates by a quarter percentage point to 0.25% to 0.5% in March, in the first hike since 2018.

Investors will also be watching for the release of the key U.S. manufacturing report Monday and the April monthly jobs report at the end of the week for further direction. Data released Friday showed the U.S. core personal consumption expenditures price index — the Fed’s favorite inflation measure — rose 5.2% in March, slightly slower than February’s 5.4% increase, the largest since 1983.

Front-month gold futures fell 1.2% last week to settle at $1,911.70 an ounce on Comex, though the June contract increased 1.1% Friday. Gold dropped 2.2% in April, its worst month since September. It retreated 3.5% in 2021. The June contract is currently down $55.10 (-2.88%) an ounce to $1,865.60 and the DG spot price is $1,857.80.

Benchmark 10-year U.S. Treasury yields climbed toward their recent multiyear peaks ahead of the Fed meeting, pressuring gold. Stemming inflation would also be bearish for the precious metal, which serves as a hedge against higher costs of goods and services.

Wall Street continues its April struggles into May. The Dow Jones Industrial Average dropped 147 points, or 0.5% at the opening while the S&P 500 fell 0.7%. The Dow and S&P 500 are coming off their worst month since the beginning of the Pandemic. The Nasdaq is in positive territory to start the day after posting its worst month since 2008 in April, pressured by rising rates, rampant inflation and underwhelming earnings from some of the largest technology companies.

The metals markets retained support from the war in Ukraine, though some positive news came Sunday after about 100 civilians were evacuated from a ruined steel plant in Mariupol and U.S. House Speaker Nancy Pelosi paid a surprise visit to the war-torn country. Gold is also a traditional hedge against uncertainty.

Coronavirus-related lockdowns in Asia, particularly China, also kept a floor under prices. Chinese economic activity shrank sharply in April following lockdowns in Shanghai and other areas. Factory orders last month contracted to the lowest level in more than two years, according to data released Saturday.

Front-month silver futures dropped 5.1% last week to settle at $23.09 an ounce on Comex, after the July futures contract declined 0.4% Friday. Silver lost 8.2% in April, also its worst monthly performance since September. It fell 12% in 2021. Silver prices are tied to industrial demand. The July contract is currently down $0.900 (-3.90%) an ounce to $22.185 and the DG spot price is $22.25.

Spot palladium decreased 2.7% last week to $2,351.50 an ounce, though it rose 4.1% Friday. 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. Currently, the DG spot price is down $95.00 to $2,262.00 an ounce.

Spot platinum rose 2% last week to $957.80 an ounce after rallying 2.7% Friday. The metal retreated 4.4% last month after dropping 4.2% in March. It lost 9.4% last year. The DG spot price is down $27.60 this morning to $929.00.


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