Gold futures ended the trading week on a high note, but they still recorded a weekly loss. Despite sharp losses earlier in the week, gold prices rebounded after the Federal Reserve confirmed that it would not raise interest rates by more than 50 basis points at each policy meeting. Can the yellow metal top $1,900 again?
June gold futures rose $7.10, or 0.38%, to $1,882.80 per ounce on Friday on the COMEX division of the New York Mercantile Exchange. Gold prices still fell 0.74% on the week, paring their year-to-date gain to below 3%.
Silver, the sister commodity to gold, struggled to sustain its momentum from Thursday. June silver futures tumbled $0.073, or 0.33%, to $22.37 an ounce. The white metal posted a 1.82% weekly drop, adding to its year-to-date decline of 4.22%.
The precious metals had faced sharp losses heading into this month’s Federal Open Market Committee (FOMC) policy meeting, expecting the Eccles Building to be more aggressive on interest rates. However, the institution confirmed that it would not pull the trigger on anything above 50 basis points during each FOMC meeting this year.
Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost of holding non-yielding bullion.
This has some market analysts thinking that gold prices are paying attention to real interest rates, which take into account inflation. So, while the benchmark fed funds rate is now in the range of 0.75% and 1%, real rates are still in subzero territory because of skyrocketing inflation.
“The most aggressive projections of Fed actions over the next 12 months will get the Fed to about 3.4%. Inflation is at 8.5%. At the end of this so-called hawkish Fed’s first year of tightening…we will be more deeply negative in real terms than we were in 1975-76, at the beginning of the great inflation of the 1970s,” said Adrian Day, CEO of Adrian Day Asset Management, in a note.
Most of the US Treasury market ballooned to end the trading week, with the benchmark 10-year yield up 7.4 basis points to 3.14%. The one-year bill dipped 2.3 basis points to 2.011%, while the 30-year bond advanced 7.7 basis points to 3.238%
The greenback ended the trading week slightly lower as the US Dollar Index (DXY) slipped 0.09% to 103.66, from an opening of 103.56. The DXY posted a weekly gain of 0.7%, raising the year-to-date surge to above 8%.
A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
In other metal markets, June copper futures fell $0.043, or 1.00%, to $4.2485 per pound. June platinum futures shed $26.00, or 2.67%, to $947.40 an ounce. June palladium futures declined $145.40, or 6.68%, to $2,032.00 per ounce.