Worst week since February
Gold prices on Friday recorded their biggest weekly percentage drop in more than four months, hit by a stronger dollar and hawkish views on interest rate hikes from US Federal Reserve officials.
Spot gold rose 0.3% to $1,918.79 an ounce, after rising as much as 1.2% as U.S. bond yields fell and closing 2.1% lower for the week. U.S. gold futures rose 0.3% to $1,928.90. Still, bullion has fallen nearly 2% so far this week and has lost more than $150 since rising above the key $2,000 level in early May.
Spot silver rose 0.7% to $22.39 an ounce, but was set for its worst weekly decline since October 2022. Platinum fell 0.65% to $917, on course for its worst week since August 2022.
Palladium steadied at $1,283.29 after hitting its lowest since May 2019 on Thursday.
After a series of consecutive sharp declines, gold prices fell to a very low level, recording the worst week since February 2023. Illustration photo
Palladium could extend its near 30% price decline this year as the rapid rise of electric vehicles threatens to dent demand.
“Fed Chair Powell is pretty hawkish, he’s in favor of more rate hikes and doesn’t see any rate cuts anytime soon. That’s pretty negative for metals,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, explaining the poor week for gold in particular and precious metals in general.
Meanwhile, San Francisco Fed President Mary Daly said in an interview with Reuters that two more rate hikes this year is a “very reasonable” forecast.
Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding it.
“Investors lack confidence in gold,” said Standard Chartered analyst Suki Cooper. “The sharp fall in risk appetite since the last Fed meeting does not necessarily indicate imminent short-covering, but it does highlight a shift in sentiment as we enter a seasonally slower demand period.”
It gets worse.
Despite its worst week since February, gold has yet to show any signs of recovery. Financial experts say it could do even worse.
The latest Kitco News weekly gold survey highlights a slightly bearish bias for the market, with some analysts saying that with the market moving lower, it is only a matter of time before it hits support at $1,900 an ounce.
Phillip Streible, chief market strategist at Blue Line Futures, said he was disappointed with the performance of gold prices over the past week; however, he added that the selling was understandable after central banks around the world stepped up their hawkish stance on their respective monetary policies.
However, he added that traditionally now is still the best time to buy gold and silver.
“You want to buy gold and silver when everyone hates it,” he said. “A drop to $1,900 for gold and $20 for silver may be what’s needed to bring new investors, new money into the market.”
James Stanley, senior market strategist at Forex.com, said he was also disappointed with gold's price action as he was expecting prices to return to $2,000 an ounce.
Stanley added that persistent underlying inflation will force the Fed to maintain its hawkish stance, creating a challenging environment for gold.
This week, 22 Wall Street analysts participated in the Kitco News Gold Survey. Of those, 11 analysts, or 50%, see gold prices falling in the near term. Meanwhile, nine analysts, or 41%, see prices rising next week, and two analysts, or 9%, see prices trading sideways.
Meanwhile, 966 votes were cast in online polls. Of those, 395 respondents, or 41%, expect gold to rise next week. Another 403 voters, or 42%, said it would be lower, while 168 voters, or 17%, were neutral in the near term.
Retail investor sentiment is at its highest since mid-February. At the same time, investors are paying more attention to precious metals, with participation in this week's survey at its highest level since March.
Still optimistic
Despite the bearish trend in the market, there are still some analysts optimistic about gold in the coming period.
Despite the bearish trend in the market, there are still some analysts optimistic about gold in the coming time. Illustration photo
While rising interest rates make bonds more attractive than gold, hawkish sentiment continues to pose risks to global financial markets, said Alex Kuptsikevich, senior market analyst at FxPro.
“The previous rally in gold was due to regional banking crises that have faded away, leading to some capital outflows from gold. However, this could flare up again as monetary tightening continues since March,” he said.
Kuptsikevich added that he is watching to see if gold can hold near-term support at $1,910 an ounce.
“If our assessment is correct and the bulls can push gold above $1,910/oz, we could see a bullish recovery towards $1,940/oz and potentially even $2,000/oz by the end of July,” he said.
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