Gold futures lost ground Thursday, but traded higher for the week after a five-session run up in prices.
“In addition to a modest overbought technical condition, the precious metal markets are being buffeted by a rising chorus of central bank rate hike threats,” analysts at Zaner wrote in a daily market update.
An aggressive half percentage point interest rate hike in May is a “reasonable option” for U.S. central bankers, said New York Federal Reserve President John Williams on Thursday.
Meanwhile, the Bank of Canada raised its policy rate by a half-point to 1% on Wednesday. Separately, the European Central Bank Thursday said it expected to end net asset buys under its Asset Purchase program in the third quarter.
Still, analysts at Zaner said they were “becoming convinced that this week’s initial gains in gold and silver prices were the result of bonafide inflation hedge buying,” they said. In fact, “gold and silver prices managed to rally despite a series of contract highs in the dollar and a general market discounting” of a jump in U.S. producer prices last month.
The cost of wholesale goods and services jumped 1.4% in March and Over the past year, wholesale prices have climbed 11.2%, U.S. government said Wednesday.
In Thursday dealings, gold for June delivery
was down $11.80, or 0.6%, at $1,972.900 an ounce, after logging its fifth straight gain Wednesday to post its highest close since March 11. May silver
was down 41 cents, or 1.6%, at $25.62, after also ending at its highest since March 11 on Wednesday.
Regular trading for Comex metals futures will be closed for Good Friday. For the week, gold based on the most-active contract trades around 1.4% higher and silver has climbed by more than 3%, FactSet data show.
Looking ahead, the outlook for gold is still bullish and “the level to beat for futures to begin a new leg in the current uptrend is the 2022 high close of $2,058” an ounce, analysts at Sevens Report Research wrote in Thursday’s newsletter. “To the downside there is formidable support between $1,920 and $1,940 that would only likely be broken if there was a substantial spike in real interest rates.”
Overall, gold has been buoyed by haven-related flows as the Russia-Ukraine war appears set to drag on. Hot inflation readings in the U.S. and Europe have also underpinned the metal, though some analysts and economists see signs that price pressures may finally be peaking after U.S. data showed consumer inflation ran at its hottest since 1981 in March.
On Thursday, U.S. data showed a bigger-than-expected rise in weekly jobless claims of 18,000 to 185,000. Sales at U.S. retailers rose a mild 0.5% in March and the cost of imported goods such as oil and food rose a sharp 2.6% in March,
For now, gold “appears to have hit a resistance barrier as the renewed pessimism for peace in Ukraine and the fallback in bond yields don’t seem to have been enough to spur an even bigger upswing,” said Raffi Boyadjian, lead investment analyst at XM, in a note.
Treasury yields have pulled back from three-year highs this week. Gold has managed to climb despite the earlier backup in yields in recent weeks, which raise the opportunity cost of holding nonyielding assets.
In other Comex dealings, May copper
fell 0.7% to $4.681 a pound. July platinum
shed 1.4% to $975.80 an ounce, but June palladium
added nearly 0.1% to $2,341.50 an ounce.