Gold futures ended lower Friday to log a weekly loss, their first in three weeks, pressured by the potential for more aggressive interest-rate hikes by the Federal Reserve to combat rising inflation.
“In the last few days, investor focus has turned to rising interest rates and tightening monetary policy, which could run through to the Fed meeting in early May,” Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.
“The prospect of a potentially more hawkish Fed has sparked a rally in the U.S. dollar, which has put a headwind in front of gold and also other currencies as seen by the recent selloffs in paper money like the Japanese yen and British pound,” he said.
Overall, “the long-term uptrend for gold remains intact, supported by gold’s role as a store of value in times of rising inflation,” but it has encountered “significant resistance near the $2,000 [an ounce] psychological barrier.
Gold for June delivery
fell $13.90, or 0.7%, to settle at $1,934.30 an ounce, for a 2.1% fall for the week, after back-to-back weekly gains, FactSet data show. May silver
lost 36 cents, or 1.5%, at $24.259 an ounce. Silver marked a 5.6% weekly fall, which was the biggest such decline for a most actively traded contract since the week ended Jan. 28.
Gold prices for gold briefly pared their decline immediately after data on Friday showed a rise in the U.S. S&P flash manufacturing PMI to 59.7 in April from 58.8, and a drop in the U.S. S&P flash services PMI to 54.7 in April from 58.0.
Gold prices fell for the week as U.S. Treasury yields recently touched their highest levels since late 2018. Treasury yields jumped Thursday, with 10-year
and 2-year Treasury note
yields hitting levels last seen in December 2018 after Federal Reserve Chairman Jerome Powell affirmed that a half percentage point interest rate hike “is on the table” when policy makers meet in May and signaled the potential for more outsize rate moves ahead.
Powell was open to a rapid pace of monetary tightening. “It is appropriate in my view to be moving a little more quickly,” Powell said. “I also think there’s something in the idea of front-end loading,” when moving away from the central bank’s easy-money policy, he said.
“Investors are now anticipating a half-point rate hike in both May and June with the likelihood of a third consecutive increase in July becoming ever stronger,” said Rupert Rowling, market analyst at Kinesis Money, in a note. “In this environment of fast-rising interest rates, gold is likely to come under pressure as its lack of yield versus other asset classes reduces its appeal.”
“Gold’s upside and downside moves now look firmly capped with rising interest rates capping gold’s upward potential with the war in Ukraine, which looks to be worsening rather than any sign of peace in the short-term, providing a strong support,” he said. “As such, gold is likely to trade in the $1,900 to $1,950 an ounce range over the medium term.”
In other Comex metals trading, May copper
lost 2.6% to $4.582 a pound, settling 3% lower for the week. July platinum
declined by 4.2% to $927.40 an ounce, for a weekly drop of 6.7%, and June palladium
settled at $2,376.30 an ounce, down 1.8% on Friday, but up 0.9% for the week.