Gold futures were marginally lower Friday, attempting to stabilize after ending the previous session at the lowest since April 2020.
Price action
- Gold for December delivery GC00, -0.50% GCZ22, -0.50% was down $1.50, or 0.1%, at $1,675.80 an ounce on Comex, on track for a weekly decline of more than 3%.
- December silver SIZ22, -1.32% shed 20.4 cents, or 1%, to trade at $19.065 an ounce, trimming its weekly gain to 1.6%.
- In other metals trade, October platinum PLV22, -1.74% fell 2.3% to $883.30 an ounce, while December palladium PAZ22, -2.47% shed 1.8% to $2,107 an ounce.
- December copper HGV22, -0.61% was off 0.5% at $3.4715 a pound.
Market drivers
Gold has been under pressure this week after a hotter-than-expected reading of the U.S. August consumer-price index reinforced expectations the Federal Reserve will raise its fed-funds rate by at least another 75 basis points when it meets next week.
While gold is often described as an inflation hedge, the aggressive tightening by the Fed has served to send the U.S. dollar surging versus major rivals, with a dollar index DXY, +0.37%, trading near a 20-year high, while Treasury yields have jumped.
A stronger dollar is seen as a negative for commodities priced in the unit, making them more expensive to users of other currencies. Higher bond yields are also a headwind, raising the opportunity cost of holding nonyielding assets.
“The monetary tightening represents a cloud over gold that has begun to weigh on prices, having fallen somewhat steadily since April of this year, despite ongoing risk,” said Christopher Louney, analyst at RBC Capital Markets, in a note.
“It seems that this is largely the story that will play out over the course of H2 2022, given rising rates and a strong dollar,” he wrote. “In fact, while our high scenario is not written off, it would clearly take a big risk off event to change the tide. The fact that gold has not really performed incrementally well even when equities have sold off recently (rolling correlation has even risen) tells us that the perceived haven role is not driving gold at the moment.”
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