Gold futures eked out a tepid gain to kick off the trading week, rebounding from a three-week low, despite a surging US dollar. The yellow was battered last week, falling more than 2%. However, with growing expectations that the Federal Reserve will slash interest rates later this year, gold prices have rebounded and have enjoyed a year-to-date gain. But will gold retrace $1,900?
April gold futures rose $2.60, or 0.14%, to $1,879.20 per ounce at 19:45 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold is up 2.6% so far this year.
Silver, the sister commodity to gold, is maintaining its downward trend. April silver futures tumbled $0.135, or 0.6%, to $22.27 an ounce. The white metal is also coming off a sharp weekly loss of 6%, adding to its year-to-date decline of close to 8%.
Market analysts say that gold was suffering from an issue of being overbought in the first month of trading and was on the cusp of facing a correction, with the January jobs report weighing on the precious metal.
With 517,000 new jobs in January, there have been broader market concerns that the Fed might continue to raise interest rates to finish the job on inflation. Although the recession is still a baseline scenario on Wall Street, the central bank ostensibly believes it has room to pull the trigger on rate hikes to ensure inflation is dead and buried.
Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost of holding non-yielding bullion.
A stronger greenback capped gold’s ascent. The US Dollar Index (DXY) surged 0.69% to 103.62, from an opening of 102.92. The index turned positive on the year, thanks to its 1.3% rally in the last week. A stronger buck is bad for commodities priced in dollars because it makes dollar-denominated commodities more expensive.
In other metal markets, March copper futures fell $0.02, or 0.49%, to $4.0365 per pound. March platinum futures dropped $2.90, or 0.3%, to $977.40 an ounce. March palladium futures declined $27.90, or 1.72%, to $1,590.50 per ounce.