Gold prices fell today, Friday, coinciding with the decline in the dollar index, however, continued economic concerns and the US debt ceiling crisis mitigated the decline in bullion.
Gold and the dollar now
Gold futures fell 0.3% to 2015 dollars.
While gold fell in spot transactions by 0.25% at 2010 dollars an ounce.
The dollar index declined by 0.06%, at 101.81 points.
Gold for settlement
Gold prices settled lower on Thursday, as investors assessed comments that could indicate continued tightening of monetary policy by the Federal Reserve.
Metal prices were affected today by the recovery of the US dollar, in addition to economic data in China that raised concerns about demand.
Upon settlement, gold futures fell 0.8%, or $16.6, to $2020.5 an ounce.
What drives prices?
Brian Lahn, managing director at GoldSilver Central, said that as investors dig into the uncertainties surrounding the debt talks and anticipate a pause in rate hikes by the Federal Reserve, there appears to be some profit-taking driving prices lower.
Gold rose on Thursday after data showed a jump in weekly jobless claims and a smaller-than-expected annual increase in producer prices last month in more than two years, but the metal closed lower as the dollar gained the upper hand, making bullion more expensive for foreign buyers.
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said that tight monetary policy may be necessary for a long time, although higher interest rates and the inversion of the yield curve may put more pressure on banks, but they will be necessary if inflation remains high.
Meanwhile, the debt ceiling meeting between US President Joe Biden and top lawmakers has been postponed to early next week.
Safe haven bullion tends to increase in times of economic or financial uncertainty, while low interest also raises the attractiveness of a non-yielding asset.
Ilya Spivak, head of global macroeconomics at Tastylive, said that markets have essentially priced in the idea that the Fed may be done with raising rates, but that traders are still looking for clear indications of the rate path.
Markets are currently pricing in an 87.1% chance for the US central bank to hold rates at their current level in June.
Central banks and gold
Separately, ANZ Bank said in a note that it expects central banks in developing economies to continue to demand gold to protect their foreign exchange reserves.
“Demand for physical gold appears to be picking up as consumers adjust to higher prices. Returning demand in India could lift gold buying there in the second half of this year,” the bank added.
gold to where?
Economists at UBS Bank expected that the US dollar would weaken further, which would push gold prices to $2,200 by March 2024.
The Swiss bank said: “With the Federal Reserve pausing to raise interest rates temporarily, while other central banks – including the European Central Bank – continue to tighten, we expect the US dollar to weaken further this year. The Fed is likely to cut rates interest sooner than other major central banks.”
The bank concluded its forecast, saying: “The weak dollar would support gold, and we expect the yellow metal’s price to rise to $2,200 by March 2024.”