Gold futures were subdued during the quiet Memorial Day holiday session. With US markets closed, the yellow metal was trading relatively flat as it attempted to lick its wounds last week after sliding 1.4%. But some analysts are confident that gold prices can recover as there is still plenty of uncertainty across the US economy and global financial markets.
Jule gold futures rose $1.70, or 0.09%, to $1,946.00 per ounce at 14:19 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices are on track for a monthly loss of around 2%, paring their year-to-date gains to nearly 6%.
Silver, the sister commodity to gold, is trying to stay above $23. July silver futures slipped $0.015, or 0.06%, to $23.345 per ounce. The white metal also tumbled close to 2% last week and is poised for a monthly decline of nearly 8%. Year-to-date, it is down more than 3%.
Gold prices have been on a downward trajectory since homing in on a fresh record high earlier this month. The precious metal reached an all-time high of $2,069.40 in August 2020. It touched as high as $2,055.70 on May 4. Since then, the front-month contract has settled below the crucial $2,000 psychological level for ten consecutive trading sessions.
Now that the debt ceiling drama appears to be over — a vote will be held on May 30 — and the banking turmoil might have subsided, the main focus for gold investors will be the Federal Reserve.
According to the CME FedWatch Tool, the futures market is pricing in an interest-rate hike at next month’s Federal Open Market Committee (FOMC) policy meeting. With inflation reaccelerating in April, traders believe the US central bank will pull the trigger on one more rate hike.
Gold is sensitive to movements in interest rates because it impacts the opportunity cost of holding non-yielding bullion.
Meanwhile, the greenback has strengthened, weighing on precious metals. The US Dollar Index (DXY), a gauge of the buck against a basket of currencies, added 0.07% to 104.28, from an opening of 104.21. The index recorded a 1.05% weekly gain and is on track for a May increase of around 2%. Year-to-date, it is up nearly 1%.
A stronger greenback is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
Moreover, a weaker economy could support gold prices, says Imaru Casanova, portfolio manager, gold and precious metals, at VanEck.
“This is gold positive both because a weak economy sends investors running to gold, and because lower rates make gold more attractive to own,” Casanova explained in an interview with MarketWatch. “The longer-term implications of a Fed pause on inflation expectations could also support gold,” given questions over whether inflation will remain elevated, she said, as gold is considered a hedge against inflation.
In other metal markets, July copper futures slid $0.01, or 0.27%, to $3.6725 per pound. July platinum futures tacked on $6.30, or 0.61%, to $1,034.40 an ounce. July palladium futures dropped $6.10, or 0.43%, to $1,420.00 per ounce.