Gold futures slumped below $1,950 to finish the trading week as the precious metal is poised for a weekly loss on a hawkish Federal Reserve. The yellow metal has been able to weather the rising-rate environment amid soaring inflation and geopolitical tensions. But can gold withstand the onslaught of tightening?
May gold futures tumbled $10.90, or 0.56%, to $1,937.30 per ounce at 15:10 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold prices are poised for a weekly loss of about 2%, paring their year-to-date rally to under 6%.
Silver, the sister commodity to gold, is attempting to stay above $24. June silver futures shed $0.366, or 1.49%, to $24.25 an ounce. The white metal is on track for a weekly decline of more than 6%, lowering its 2022 gain to below 4%.
Metal commodities are taking a beating on a strengthening US dollar and rising Treasury yields.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, soared 0.68% to 101.26, from an opening of 100.62. The index will post a weekly boost of around 0.7%, lifting its year-to-date rally to 5.5%.
A stronger buck is typically bearish for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
The US Treasury market was mostly mixed to close out the trading week, with the benchmark 10-year yield down 0.011% to 2.906%. The one-year bill added 0.05% to 2.067%, while the 30-year bond was unchanged at 2.933%.
Gold is sensitive to a rising-rate environment because it increases the opportunity cost of holding non-yielding bullion.
Investors have been pouring into these two instrumental safe-haven markets because of a hawkish tone produced by the Federal Reserve this week. Scores of Fed officials, including Chair Jerome Powell, conceded that a 50-basis-point hike is likely to happen at next month’s Federal Open Market Committee (FOMC) policy meeting.
“It is appropriate in my view to be moving a little more quickly,” Powell said during an International Monetary Fund (IMF) event. “I also think there’s something in the idea of front-end loading.”
This has market analysts anticipating Treasurys to begin soaring in the coming months.
“Bottom line, the Treasury market continues to play ‘catch up’ with expected rate hikes and now the market appears to pricing in 150 bps of hiking by the end of the July meeting, which is flattening the curve more. If the 10s-2s yield curve continues lower and re-inverts, that will reinforce the signal that the economy is likely headed for a future slowdown, one likely less than a year away,” wrote Tom Essaye, founder of Sevens Report Research, in a research note.
In other metal markets, May copper futures declined $0.0605, or 1.3%, to $4.643 per pound. May platinum futures plunged $39.30, or 4.06%, to $928.50 an ounce. June palladium futures slipped $25.70, or 1.06%, to $2,394.50 per ounce.