Gold prices remained subdued on Friday, following a significant decline below crucial levels earlier this week. The positive outlook surrounding a potential resolution to the US debt ceiling issue prompted traders to abandon safe-haven assets, shifting attention towards forthcoming cues on monetary policy from the Federal Reserve.
This week, the price of gold plummeted below the significant threshold of $2,000, surpassing major support levels after the Biden administration expressed optimism about reaching a deal to raise the US debt ceiling.
This development triggered a rally in risk-driven assets as the possibility of US defaults diminished. The surge in the dollar to its highest level in seven weeks also exerted additional pressure on the metal markets, making purchases more expensive for international buyers.
At 20:19 ET (00:19 GMT), spot gold inched up by 0.1% to $1,958.99 per ounce, while gold futures experienced a similar rise of 0.1% to $1,961.40 per ounce. Both instruments suffered a decline of 2.6% to 3% for the week, marking their most significant drop since late January.
Gold markets were further unsettled by hawkish statements from Federal Reserve officials, as the possibility of prolonged higher interest rates in the US indicated an increased opportunity cost of holding non-yielding assets such as gold.
The focus has now shifted to a panel discussion at a conference in Washington, D.C., featuring Federal Reserve Chair Jerome Powell. Traders eagerly anticipate any indications regarding future monetary policy.
The prevailing sentiment among Fed speakers this week was that inflation remained excessively high, necessitating a hawkish stance to mitigate rising prices, potentially leading to additional rate hikes.
Market expectations, as reflected in Fed fund future prices, still suggest that a pause in the Fed’s rate hikes is likely by June. With interest rates projected to remain elevated for a longer duration, gold and other precious metals are expected to face sustained pressure.
Nevertheless, there is still the possibility of gold experiencing an upward trajectory later this year, especially as economic conditions deteriorate and the Federal Reserve eventually pauses its rate hike campaign. Swiss bank UBS anticipates gold to reach $2,100 per ounce by the end of the year.
In the realm of other precious metals, platinum and silver futures stabilized on Friday, trading within a narrow range. However, both metals were poised to register approximately a 2% decline for the week.
Meanwhile, copper prices saw a slight increase on Friday, yet were on track to record losses for the week due to growing concerns over China, a major importer.
Copper futures rose by 0.1% to $3.6975 per pound but experienced a weekly decline of 0.8%.
Economic indicators from China continued to indicate a slowdown in the post-COVID recovery, leading the red metal toward its fifth consecutive week of losses.
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