Gold futures ended lower on Friday, leading prices to an overall loss for the week just a day after posting their second-highest settlement on record, as investors weighed expectations that the Federal Reserve may soon halt its campaign of interest rate increases.
Price action
-
Gold futures for June delivery
GC00,
-0.34%GCM23,
-0.34%
fell by $39.50, or 1.9%, to settle at $2,015.80 per ounce on Comex. Prices for the front-month contract lost 0.5% higher for the week, according to Dow Jones Market Data. -
Silver futures for May delivery
SI00,
-0.48%SIK23,
-0.48%
declined by 46 cents, or 1.8%, to $25.46 per ounce. It ended 1.5% higher for the week. -
Palladium futures for June delivery
PAM23,
+0.43%
rose 70 cents, or nearly 0.1%, to $1,496.30 per ounce, for a weekly rise of 2.3%, while platinum futures for July delivery
PLN23,
+0.27%
declined by $11.50, or 1.1%, to $1,054 per ounce, with prices up 3.7% for the week. -
Copper futures for May delivery
HGK23,
-0.42%
shed 2 cents, or 0.4%, to $4.11 per pound. Prices for the industrial metal saw a weekly rise of 2.3%.
Market drivers
Friday’s price action “suggests gold is overbought in the near term,” said Andrew Schrage, chief executive officer at Money Crashers.
Gold futures on Thursday shot to their highest levels since Aug. 6 2020, closing in on the all-time settlement high from that date of $2,069.40, as a softening U.S. dollar, recession fears and expectations that the Federal Reserve will soon end its campaign of interest rate rises have bolstered demand for precious metals.
“For gold to break through any records, we’d probably need some confirmation that the [Federal Reserve] is done hiking rates,” Schrage told MarketWatch. “Markets are coming around to this idea, but there’s still significant uncertainty.”
Gold has benefitted from central bank gold buying, further weakness in the U.S, “inflation is not going away with economies heading into recession, historic geopolitical shifts taking place — which threaten to dethrone the U.S. dollar as the global reserve currency — and many unknown risks which stem from higher rates,” said Peter Spina, president of GoldSeek.com.
At the moment, it’s “very difficult to say gold is ready to breakout to new highs in the coming days, or if it will take some weeks to consolidate below record highs and then make another push higher,” said Spina, in recent comments. “The market is overbought short-term.”
Still, “with prospects of rate hikes ending, inflation is not coming down to the 2% target, and an economy looking to enter into contraction phase, the stagflationary scenario looks to be coming into play,” he said. “This is the most bullish of bullish scenarios for gold. Where real interest rates are negative and there are very few sectors seeing any growth.”
Traders have been keeping an eye on U.S. economic data for signs of a slowdown that may lead the Fed to pause or end its efforts to tame inflation by lifting interest rates.
Spina pegged the initial upside target, once gold hits record highs, at $2,300 to $2,500, with a potential to see a rise as high as $2,7000 “as Western buyers join many parts of the world buying gold.”
Data released Friday showed U.S. sales at retailers fell more than expected, by 1% in March. U.S. industrial production, however, rose 0.4% in March, above Wall Street expectations for a 0.2% gain.
A survey of consumer sentiment from the University of Michigan, meanwhile, edged up to 63.5 in April, from 62 in March.
“Although gold slightly whipsawed to the disappointing U.S. retail sales figures, which stoked recession fears, the outlook remains bullish — especially with market still seeing the Fed cutting rates by summer,” said Lukman Otunuga, manager, market analysis at FXTM.
Read the full article here
