Desk Report
Publish: 29 Jan 2022, 06:22 pm
Gold Bars || Photo; Collected
Gold
prices posted their lowest finish in more than six weeks on Friday, as the
dollar climbed in a week that has helped solidify opinions among investors that
the Federal Reserve is readying for an interest-rate hike in March.
“Gold
prices have moved lower this week, pressured by the Fed’s clear intent to raise
rates beginning in March and to begin to reduce its balance sheet shortly after
it begins to increase rates,” Jeff Klearman, portfolio manager at
GraniteShares, which offers the GraniteShares Gold Trust BAR, -0.34%, told
MarketWatch.
April
gold GCJ22, -0.15% GC00, -0.15%, which is now the most-active futures contract,
fell 0.5%, or $8.40, to settle at $1,786.60 an ounce. That was the lowest
settlement since Dec. 15, according to Dow Jones Market Data.
February
gold GCG22, -0.17%, previously the
most-active contract, shed 0.5%, or $8.20, to $1,784.90 an ounce. The contract
finished 2% lower to $1,793,10 on Thursday, a loss that marked its first
settlement below $1,800 for a most-active contract since Jan. 10, and the
weakest close since Jan. 6, according to Dow Jones Market Data.
Based
on the most-active contracts, gold was down 2.5% for the week — the biggest
weekly decline since November 2021.
Meanwhile,
silver for March delivery SIH22, -0.82%
fell nearly 1.7%, or 37 cents, to $22.301 an ounce, following a near 5% drop on
Thursday. The precious metal saw an 8.3% decline for the week, the worst weekly
since September 2020.
As
gold fell, the U.S. dollar, as measured by the ICE U.S. Dollar Index DXY,
-0.04%, was down less than 0.1%, but eying a weekly gain of 1.3%. Priced in
dollars, gold tends to move inversely to the U.S. currency as a higher dollar
value makes purchases of the precious metal pricier for foreign investors.
Prospects
for higher U.S. interest rates have been driving up the dollar. At a news
conference following the Federal Open Market Committee meeting on Wednesday,
Chairman Jerome Powell didn’t reject the idea of hiking interest rates at each
of its meetings in 2022, and talked of the need to be “nimble.”
Powell’s
press conference Wednesday “made clear that the Fed believes the economy and
labor markets are strong and is able to absorb interest rate increases to
prevent sustained levels of higher-than-desired inflation,” said Klearman.
Worries
about how fast and how many interest rates hikes will be seen this year, as the
central bank battles high inflation, are among factors that have been roiling
global financial markets this week, triggering big swings in equities.
“Ten-year
real rates have not moved much higher since the FOMC announcement and are still
negative,” said Klearman. “And, interestingly, 10-year inflation expectations
have not moved lower, hovering around 2.5%.
Both of these conditions are somewhat supportive of gold prices.”
“Gold
prices may continue to drift lower in this environment,” he said, but “the
opportunity cost of holding gold is still positive (because of negative real
rates), likely limiting gold price declines.”
Some
shine came off gold Friday as tensions between the West and Russia over a
potential invasion by the latter into Ukraine appeared to ease somewhat.
Russia’s foreign minister Sergey Lavrov said Friday that Moscow doesn’t intend
to start a war, but also “would not let our interests be rudely trampled on and
ignored.”
Meanwhile,
economic data released Friday showed a measure of U.S. inflation preferred by
the Federal Reserve leaped 5.8% in 2021 after another sharp increase in
December, underscoring why the central bank is moving to raise interest rates
for the first time in four years.
Separately,
U.S. consumer spending sank 0.6% in December — the first decline in 10 months.
Adjusted for inflation, consumer spending shrank an even sharper 1%.
Gold
prices briefly pared some of its losses immediately after data showing the the
University of Michigan’s gauge of consumer sentiment fell to a final January
reading of 67.2 , down from an initial reading of 68.8 and well below
December’s number of 70.6. Friday’s figure represents the lowest level of
consumer sentiment since November of 2011.
Among other metals, palladium’s most-active March contract PAH22, +0.34% added 0.4% to $2,375.30 an ounce, marking the highest finish since September. Prices rose nearly 13% for the week. April platinum PLJ22, -1.00% fell 1.5% to $1,006.60 an ounce, losing almost 2.8% for the week. March copper HGH22, -2.16% fell 2.6% to $4.31 a pound, posting a weekly decline of 4.7%.
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