Gold futures continued to decline heading into the holiday weekend as investors turned sour on the Federal Reserve suggesting that interest rates could stay higher for longer, with “various” officials discussing the possibility of tightening monetary policy amid persistent inflation pressures.
June gold futures cratered $48.50, or 2.05%, to $2,343.80 per ounce at 15:03 GMT on Thursday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a weekly loss of around 2%, paring its year-to-date gain to around 13%. Gold prices are now trading at a one-week low.
Silver, the sister commodity to gold, continued sliding toward $30. July silver futures plunged $1.071, or 3.4%, to $30.425 per ounce. The white metal is still poised for a weekly boost of about 1.5%, and it is up roughly 27% so far this year.
Financial markets are still reacting to the minutes from the May Federal Open Market Committee (FOMC) policy meeting. The meeting summary showed officials still fearful of sticky and stubborn inflation and some are entertaining the idea of expanding the central bank’s restrictive stance.
“Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective,” the summary said. “The recent monthly data had showed significant increases in components of both goods and services price inflation.”
As FX Daily Report noted on Wednesday:
“This week, many Fed officials have expressed concern surrounding the lack of progress on inflation. However, the consensus is that inflation will continue to come down at a slower pace, meaning rates could stay higher for longer.”
On the data front, initial jobless claims dipped to 215,000 for the week ending May 18. Continuing jobless claims jumped to 1.794 million, while the four-week average edged up to 219,750.
The S&P Global manufacturing purchasing managers’ index (PMI) increased to 50.9 this month, up from 50 and slightly higher than the market estimate of 50. The composite PMI surged to 54.4, while the services PMI advanced to 54.8. The Kansas City Fed’s manufacturing and composite indexes were stuck in contraction territory.
In addition, the Chicago Fed National Activity Index weakened to -0.23.
The US Dollar Index (DXY), a gauge of the buck against a basket of currencies, was flat at 104.95. The index is poised for a weekly jump of 0.46% and has risen 3.6% so far this year. A stronger greenback is typically bearish for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
On the housing front, new home sales tanked 4.7% to 634,000 units. Building permits dropped 3% to 1.44 million units.
US Treasury yields were in a sea of green toward the end of the trading week, with the benchmark ten-year yield picking up 6.2 basis points to 4.496%. The two-year yield tacked on seven basis points to 4.948%.
In other metal markets, June copper futures fell $0.039, or 0.8%, to $4.8095 per pound. June platinum futures slumped $13.40, or 1.28%, to $1,036.30 per ounce. June palladium futures plunged $23.80, or 2.37%, to $980.00 an ounce.