Gold futures slumped but finished the opening-week trading session above $2,000. The yellow metal has repeatedly failed to top its August 2020 record high of $2,069.40, although market analysts say that gold prices still possess plenty of support. With uncertainty in the broader financial markets and economy, the greenback will play a crucial role in gold’s performance.
June gold futures tumbled $8.00, or 0.4%, to $2,007.80 per ounce at 18:09 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold was roughly unchanged last week, but it is up nearly 10% year-to-date.
Silver, the sister commodity to gold, struggled to stay above $25 to kick off the trading week. May silver futures plummeted $0.36, or 1.41%, to $25.10 an ounce. The white metal rose 0.4% last week and is up nearly 4% this year.
Gold prices extended last week’s sell-off and briefly slipped below the crucial psychological level of $2,000.
The cause? A strengthening greenback.
The US found support in comments from a few Federal Reserve officials who purported that the central bank needs to keep raising interest rates since inflation remains too high.
A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, advanced 0.59% to 102.16, from an opening of 101.57. The index slumped 0.4% last week and is down 1.32% year-to-date. But the buck is showing signs of renewed life.
At the same time, market analysts say that this consolidation is good news for prices since this could fuel a new bullish ascent and could retest all-time highs. Because the Fed and other central banks are at or near peak interest rates, the odds of falling interest rates could be good news for gold prices.
Gold is typically sensitive to movements in interest rates because they impact the opportunity cost of holding non-yielding bullion.
The US treasury market was mostly up across the board, with the benchmark ten-year yield rising more than seven basis points to 3.595%. The one-month bill shed 23.5 basis points, while the 30-year bond jumped nearly seven basis points to 3.804%.
In other metal markets, May copper futures tumbled $0.0415, or 1.01%, to $4.065 per pound. May platinum futures added $7.30, or 0.71%, to $1,061.50 an ounce. May palladium futures surged $64.20, or 4.29%, to $1,560.50 per ounce.