Gold futures settled lower for a fourth day in a row on Thursday as expectations for aggressive action by the Federal Reserve diminished the precious metal’s luster, sending prices down by more than 2% for the month to their lowest finish since February.
Silver prices also softened, down a third straight day and ending the month with a loss.
for August delivery lost $10.20, or 0.6%, to settle at $1,807.30 per ounce, the lowest most-active contract finish since early February, according to Dow Jones Market Data. Prices fell 2.2% for the month and 7.5% for the quarter. They trade 1.2% lower year to date.
What analysts are saying
Gold bucked an overall upward trend in the commodities market, ending lower for the month, quarter, and year to date.
A strong U.S. dollar and rising interest-rate expectations continue to weigh on the gold, with the metal “once again unable to benefit from the ongoing risk aversion in the markets,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in a Thursday note.
One precious metals analyst said the decline in gold and silver prices this week has been a delayed reaction to the increasing hawkishness from the Federal Reserve and other central banks.
“What we’re seeing here is a little bit of a delayed reaction to the hawkishness that we’ve seen from the U.S. central bank and increasingly other central banks around the world,” said Bart Melek, global head of commodity strategy at TD Securities, during a conversation with MarketWatch.
“Jerome Powell is hanging around with his European counterparts and the discussion du jour is inflation and what to do with it.”
The prospect of higher interest rates has dampened demand for gold because higher rates make bonds a more attractive investment by comparison, since gold doesn’t offer a yield.
Powell said on Wednesday that there is “no guarantee” that the Fed could drive inflation back down to its 2% target without crashing the robust American labor market. The Fed chairman spoke during a panel discussion during the ECB’s summer policy conference in Sintra, Portugal.
Melek added that he expects gold will continue to weaken as algorithmic traders like commodity trading advisors ramp up bets against the yellow metal. The next technical support level for gold is $1,795 per ounce.
Meanwhile, the PCE inflation gauge for May — which is the Fed’s preferred measure of inflationary pressures in the United States — saw core inflation slow slightly to 4.7%, while the headline number remained unchanged at 6.3%. Consumer spending increased by just 0.2% last month, an increase that was smaller than what economists polled by FactSet had anticipated. Meanwhile, weekly jobless claims data showed the number of Americans applying for jobless benefits for the first time decreased last week by 2,000.
Naeem Aslam, chief market analyst at AvaTrade, said he expects gold will remain volatile in the wake of the latest batch of U.S. data, as traders looking to hedge their risk in a highly uncertain environment should help keep the price of gold from “falling off a cliff.”