Gold futures pulled back from their best levels in eight years as the precious metal faced resistance from a strengthening US dollar. The forecasts in gold markets are that the yellow metal is eyeing $2,000, which many analysts say is possible but will need to overcome some hurdles first. But a stronger greenback may prevent gold from surging to an all-time high.
June gold futures tumbled $24.30, or 1.38%, to $1,744.50 per ounce at 19:20 GMT on Wednesday on the Comex division of the New York Mercantile Exchange. Gold prices recently hit their highest levels since 2012, leaving investors believing they could soon top $1,800. Year-to-date, gold has soared 15% as investors seek refuge from the market mayhem unfolding over the last seven weeks.
Silver, the sister commodity to gold, also slumped in the middle of the trading week. May silver futures fell $0.49, or 3.04%, to $15.645 an ounce. The white metal has rebounded more than 30% over the last month, paring its YTD loss to under 13%.
Gold joined the broader market declines midweek as investors continued to face greater uncertainty. Since there are warnings that the US economy could endure the worst recession since the 1930s, traders are not confident in scooping up gold just yet due to liquidity concerns during huge selloffs. Despite the plethora of negative economic data coming out on Wednesday, it was not enough to boost gold.
Risk appetite could be the one thing that could cap gold’s ascent to a record high. If there is too much instability, investors will only want to hold cash – and this has lifted the dollar during the turmoil.
It did not help the metal that the US dollar surged again. The US Dollar Index, which measures the greenback against a basket of currencies, advanced 0.6% to 99.48, from an opening of 98.82. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase. Both assets have been the lone bright spots in the overall financial market due to their conventional safe-haven statuses.
With more central banks ramping up their accommodative actions – the Bank of Canada (BoC) extended its quantitative easing program, while the People’s Bank of China (PBoC) slashed a medium-term lending interest rate – there are inflation concerns. If there is rampant price inflation on the other side of the lockdown, gold could eventually top the $2,000 mark.
In other metal markets, May copper futures shed $0.033, or 1.42%, to $2.2965 an ounce. May platinum futures dropped $14.90, or 1.82%, to $804.80 per ounce. May palladium futures slipped $30.40, or 1.39%, to $2,155.00 an ounce.