Gold futures settled the midweek trading session lower, but they still finished above the crucial psychological level of $2,000. Gold prices have struggled to climb above the August 2020 record high of $2,069.40, although market analysts are confident the yellow metal will flirt with this number. Can gold bugs be optimistic?
June gold futures tumbled $12.40, or 0.6%, to $2,007.30 per ounce on Wednesday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a weekly loss of about 2%, but it remains up nearly 10% year-to-date.
Silver, the sister commodity to gold, recorded modest gains in the middle of the trading week. May silver futures rose $0.11, or 0.4%, to $25.37 per ounce. The white metal is also down about 2% on the week, but prices have surged close to 5%.
Losses in commodity prices were caused primarily by the Federal Reserve and comments from central banks about the need to keep raising interest rates. St. Louis Fed Bank President James Bullard told Reuters that the institution could raise rates higher to combat inflation without triggering a recession.
This also supported the greenback as the US Dollar Index (DXY), a gauge for the greenback against a basket of currencies, jumped 0.2% to nearly 102.00. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
In addition, gold is typically sensitive to a rising-rate climate because it can affect the opportunity cost of holding non-yielding bullion.
Most investors are anticipating the Fed to raise interest rates by a quarter point at next month’s Federal Open Market Committee (FOMC) policy meeting.
The US Treasury market was mixed, with the benchmark ten-year yield down 0.05 basis points to 3.597%. The one-month bill rose a single basis point to 3.76%, while the 30-year bond was flat at 3.79%.
Meanwhile, global investors are expecting tighter monetary policy overseas after the UK inflation rate continued to stay above 10% and topped economists’ expectations of 9.8%.
On the US economic front, the Fed’s Beige Book revealed that the national economy was “little changed” in late March and early April. However, credit markets had ostensibly gotten tighter.
“Lending activity declined substantially,” the Beige Book said.
In other metal markets, June copper futures dipped $0.0065, or 0.16%, to $4.0705 per pound. June platinum futures slipped $1.50, or 0.14%, to $1,104.20 an ounce. June palladium futures shed $9.30, or 0.57%, to $1,609.50 per ounce.