Bargain Hunting Boosts Gold
6/23/2023
Gold is staging a recovery on Friday as bargain hunters step in, but it’s still heading for its biggest weekly decline since February. The decline can be attributed mainly to expectations of further interest rate hikes by the Federal Reserve.
The price of gold has been hovering near its lowest level in over three months, primarily due to the strengthening of the dollar. This makes gold slightly less appealing as a financial asset for investors.
Yesterday, gold prices fell by 1.1%, settling at $1,923.70 per ounce on theComex. Over the course of this week, gold has experienced a decline of 2.4%. It’s worth noting that Comex futures didn’t have a settlement on Monday due to the closure of U.S. financial markets for the Juneteenth holiday. In May, gold experienced a 0.9% decline following a 0.6% increase in April and an impressive 8.1% surge in March. In 2022, gold saw a decrease of $2.40. Currently, the contract is up by $17.20 (+0.89%) per ounce, reaching $1940.90, while the spot price stands at $1937.30.
Federal Reserve Chairman Jerome Powell testified before a House panel on Wednesday and indicated that most Fed policymakers anticipate further rate increases to tackle inflation. Although inflation has somewhat eased since mid-2022, it remains high, and there’s still a long way to go in bringing it back down to the target of 2%.
After implementing ten consecutive rate increases to combat inflation, the Federal Reserve recently decided to keep its benchmark federal funds rate steady at 5.00% to 5.25%. This decision has sparked speculation about whether the rate hikes have concluded or if there are more to come.
According to the CME FedWatch Tool, approximately 76.9% of investors predict a 25-basis-point interest rate hike at the upcoming July monetary policy meeting, while 23.1% expect rates to remain unchanged.
Over the past year, the Fed has raised rates by 25 basis points three times, with larger increases of 50 basis points in December and 75 basis points in June, July, September, and November 2022. Smaller increases were implemented in March and May of last year. In total, the rate hikes have amounted to 5 percentage points since March 2022.
In other economic news, the index of leading U.S. economic indicators has declined for the 14th consecutive month, as per the data released on Thursday. The Conference Board has stated that this trend “continues to point to weaker economic activity ahead” due to rising interest rates and persistent inflation, which are expected to further dampen economic activity.
Regarding employment, the weekly initial jobless claims in the United States have remained at 264,000 for the week ending June 17. This figure represents the highest level since October 2021 and is higher than what economists had forecasted.
Silver futures dropped by 1.5% on Thursday, settling at $22.67 per ounce on Comex. So far this week, the most-active contract has experienced a decline of 6.9%. In May, silver declined by 6.5% following a 4.4% increase in April and a significant 15% surge in March. Silver witnessed a 3% increase in 2022. Currently, the contract is up by $0.065 (+0.29%) per ounce, reaching $22.735, while the current spot price stands at $22.56.
Please note: The following post is intended solely for informational and thought-provoking purposes. It does not claim to accurately predict or forecast real-world outcomes. This editorial expresses an opinion and should not be taken as investment advice or a recommendation regarding specific securities, commodities, or actions. The author cannot be held responsible for these opinions.
