Gold under pressure by strong dollar as the currency hovered near 20-year highs after a positive U.S. jobs report Friday heightened speculation of aggressive interest rate hikes later this month and for the rest of the year.
The stronger dollar makes gold more expensive for holders of other currencies and makes the yellow metal a less attractive alternate investment.
U.S. nonfarm payrolls increased more than expected in June, reducing fears that the interest rate increases that have already occurred were weakening the labor market and pushing the economy into a recession. Payrolls rose by 372,000 last month, exceeding the 250,000 consensus estimate by economists surveyed by Dow Jones. Unemployment held at 3.6%, in line with estimates.
August gold futures tumbled 3.3% last week to settle at $1,742.30 an ounce on Comex, in the fourth consecutive weekly decline. The front-month contract rebounded 0.2% Friday. Bullion fell 2.2% in June after tumbling 3.3% in May, its worst month since September. The metal retreated 3.5% in 2021.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.1% Friday to 1,023.27 metric tons. The August contract is currently down $6.5 (-0.37%) an ounce to $1,735.80 and the DG spot price is $1,739.70.
Federal Reserve policymakers are widely expected to boost interest rates by another 75 basis points later this month to try to rein in skyrocketing inflation. U.S. inflation remained high in May, according to the Federal Reserve’s favorite measure, though there were signs that it started to ease.
Investors will be closely watching for the consumer price index for June on Wednesday, along with the Beige Book report on the state of the economy in the Fed’s 12 districts.
Atlanta Fed President Raphael Bostic said Friday that he would back the 75 basis point hike later this month and that the June jobs report reaffirmed “that the economy is strong and there is still a lot of momentum in the labor market, and that is a good thing.” The next policy decision from the Fed is due out July 27. Additional meetings this year are scheduled for September, November and December.
Higher interest rates and bond yields raise the opportunity cost of holding gold, pressuring the yellow metal.
While most haven investors are turning to the dollar and Treasurys, gold still has some support because of uncertainty over the pandemic, and high inflation.
In other economic events, New York Fed President John Williams is scheduled to speak Monday and Richmond Fed President Tom Barkin on Tuesday. Thursday brings reports on the producer price index and initial jobless claims and comments from Fed Governor Chris Waller. Retail sales, the Empire state manufacturing index, the University of Michigan consumer sentiment report and comments from Bostic are scheduled for Friday.
September silver futures decreased 2.2% last week to settle at $19.24 an ounce on Comex, though it rose 0.3% Friday. Silver declined 6.2% in June after falling 6.1% in May. It retreated 12% in 2021. Silver prices are tied to industrial demand. The September contract is currently down $0.066 (-0.34%) an ounce to $1,917 and the DG spot price is $19.28.
Spot palladium climbed 9.7% last week to $2,186.00 an ounce after rallying 7.3% Friday. It fell 2.9% in June after losing 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. The current DG spot price is up $18.40 an ounce to $2210.00
Spot platinum rose 0.9% last week to $901.50 an ounce after increasing 2% Friday. It decreased 7.2% in June after gaining 2.3% in May and losing 9.4% last year. Currently, the DG spot price is down $18.50 an ounce to $882.30.
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