Gold Nears Fourth Consecutive Weekly Decline Amid Rising Rate Hike Expectations

The value of gold is approaching its fourth straight week of decline, driven by growing anticipation for hikes in interest rates. This sentiment has been fueled by recent U.S. employment data and statements from Federal Reserve policymakers hinting at sustained increases in interest rates. As gold does not earn interest, these developments are exerting downward pressure on the precious metal’s market price.

By 0505 GMT on Friday, the spot price of gold held steady at $1,912.39 per ounce, reflecting a 0.3% drop for the week. In contrast, U.S. gold futures showed a marginal uptick of 0.1%, climbing to $1,918.00.

Current U.S. private payroll numbers indicate a robust labor market, despite the looming threat of a recession induced by elevated interest rates. Investors are now keenly awaiting the June non-farm payroll data, which could shed more light on the Federal Reserve’s policy direction.

Tim Waterer, Chief Market Analyst at KCM Trade, highlighted that the strength and resilience of the U.S. job market bolster the argument for the Federal Reserve to continue raising the benchmark interest rate. At present, the markets are fixated on interest rates and speculation about the final rate setting. With U.S. yields at high levels, gold is facing challenges to sustain its value above the $1,900 mark in the short term.

Further stirring the pot, Lorie Logan, President of the Federal Reserve Bank of Dallas, hinted at the possibility of a rate hike at the June policy meeting. Her remarks underscore the belief that further interest rate increases are on the horizon.

Market watchers are also closely tracking U.S. Treasury Secretary Janet Yellen’s visit to Beijing amidst disputes over China’s restrictions on gallium and germanium exports. Any intensification in trade tension between the two largest global economies could dampen market sentiment and potentially spark safe-haven buying demand for gold, as noted by Waterer.

In the realm of other precious metals, spot silver dropped by 0.2% to $22.7009 per ounce, while platinum remained unchanged at $902.40. BofA Global Research revised its 2023 price forecast for gold and other precious metals downwards, suggesting that silver might outperform as the global economy reaches its low point in 2024. Meanwhile, palladium saw a 0.2% increase to $1,244.18, setting it on course for a 1.3% weekly gain.