Gold futures eked out slight gains Thursday, as the U.S. dollar surged, Treasury yields rose and stocks reversed a brief rally on Wall Street.
Stocks rallied Wednesday after Federal Reserve Chair Jerome Powell said the central bank was not planning to hike its benchmark interest rate by 75 basis points at its next meeting, but safe-haven assets were back in vogue Thursday with equity indexes giving back the previous session’s gains.
June gold futures
rose $6.90 or 0.4%, to settle at $1,875.70 per ounce, after trading above $2,000 an ounce. Silver futures SI00
rose 0.2% to settle at $22.443 per ounce.
“Gold can make some progress from here,” said George Milling-Stanley, chief gold strategist at State Street Global Advisors, by phone.
He pointed to investors flocking to real assets like gold as stocks tumbled with the Fed focusing on taming high inflation which has been exacerbated by Russia’s war in Ukraine.
“Those tend to be supportive of gold,” Milling-Stanley said, while pointing to the metal’s resilience in past Fed rate hiking cycles. “Those are very good reasons why we might see higher prices unfold.”
As investors reconsidered the potential effects of tighter monetary policy on Thursday, Treasury yields and the dollar both rose sharply. The 10-year Treasury rate
shot above 3.1%, while the ICE U.S. Dollar Index
surged 1.3%, as measured against a basket of six major rivals. A stronger dollar can be a negative for commodities priced in the unit, making them more expensive to users of other currencies. Attractive Treasury yields also can dull the luster of gold, which doesn’t offer a yield.
Gold posted positive first-quarter performance, up 6.6%, while most other corners of financial markets sagged. It also managed to “hold meaningful support levels,” according to Wells Fargo Institute’s second-quarter outlook, which forecast a year end $2,000 to $2,100 price target on gold. “Investor focus and flows will be brought back to the yellow metal, in our view, should equity returns moderate and real rates remain low.”
In economic data, first-time U.S. jobless claims rose 19,000 last week to 200,000. U.S. productivity fell at a 7.5% annual rate in the first quarter, the biggest drop since 1947. Unit-labor costs jumped at an 11.6% annual pace in the first quarter.
In other metals trade, July copper
fell 1.1% to settle at $4.2915 a pound.