Gold futures slumped below $1,850 to kick off the holiday-shortened trading week, driven mainly by a stronger US dollar. Like the broader equities market on Tuesday, gold prices took a hit on growing expectations that the Federal Reserve could raise interest rates more amid elevated price inflation. This is a complete reversal from what many had been anticipating since November.
April gold futures tumbled $6.60, or 0.36%, to $1,843.60 per ounce at 19:29 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. Gold prices are coming off a weekly loss of about 1%, trimming their year-to-date gain to below 1%.
Silver, the sister commodity to gold, flirted with $22 on Tuesday. April silver futures added $0.15, or 0.69%, to $21.865 per ounce. The white metal fell 0.6% last week, adding to its year-to-date drop of nearly 10%.
Shifting changes in expectations surrounding interest rates put a significant damper on stocks and metal commodities. With the disinflation narrative taking a hit and multiple Fed officials presenting an argument for higher interest rates, investors are now penciling in more rate hikes heading into the second half of 2023.
Investors will be combing through the minutes from this month’s Federal Open Market Committee (FOMC) that could offer insight into what rate-setting members are thinking about the current economic landscape.
Meanwhile, Minneapolis Fed Bank President Neel Kashkari told CNBC that the central bank needs to be more aggressive on rate hikes to bring inflation back down to 2%.
“Raising rates can put a lid on inflation. We need to raise rates aggressively to put a ceiling on inflation, then watch monetary policy work its way through the economy. And we can always back off,” he told the business news network on Monday. “We’re having to let inflation guide policy rather than our models guide policy. And that’s challenging. It’s challenging because there are lags that you’re well aware of. But the most important thing that people should take away from this is we’re totally committed to getting inflation back down to 2%. Not 2.5, not three, getting back down to 2%. And we’re going to get that done. Now. Is it going to take two years is it going to take a little longer? I’m not exactly sure, but we’re going to get it done.”
The US Dollar Index (DXY), which measures the greenback against a basket of currencies, rose 0.31% to 104.18, from an opening of 103.91. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
The US Treasury market was up across the board, with the benchmark ten-year yield up 12.6 basis points to 3.954%. The one-month bill dipped nearly one basis point to below 4.59%, while the 30-year bond jumped 9.2 basis points to 3.98%.
In other metal markets, April copper futures surged $10.085, or 2.64%, to $4.217 per pound. April platinum futures added $25.90, or 2.81%, to $947.30 an ounce. April palladium futures tacked on $36.00, or 2.41%, to $1,528.50 per ounce.