Gold records third consecutive weekly fall over Fed. rate hikes

BY ONOME AMUGE

Gold prices were hit by a third straight weekly decline as investors got perturbed over the prospects of aggressive rate hikes from the U.S. Federal Reserve, though a slight ease in the dollar helped the yellow metal stay firm on the day.

Spot gold was up 0.3 percent to $1,883.31 per ounce, but lost 0.7 percent for the week while U.S. gold futures rose 0.4 percent at $1,883.50 per ounce.

Commenting on gold’s current position, Ross Norman, an independent analyst, remarked that the metal has some pretty strong headwinds, notwithstanding serious inflation, from both the dollar index being up to multi-decade highs and the 10-year U.S. Treasury back above the three percent level.

The Federal Reserve had during the week, raised its benchmark rate by half a percentage point, the most in 22 years, but Chairman Jerome Powell, the chair, explicitly ruled out raising rates by three-quarters of a percentage point in a coming meeting.

Han Tan, chief market analyst at Exinity, observed that the precious metal was unable to capitalise on Powell’s “less hawkish than expected” message during the week.

Despite gold’s disappointing performance, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said the metal will continue to do well in a low real interest rate environment as an essential diversification tool, adding that there are more threats to the course of the stock market right now than there are to the gold market.

In a note to Business A.M., Edward Moya, senior market analyst at OANDA, said gold prices are still “licking their wounds” following the bond market selloff.

Moya noted that investors will need additional safe-havens, giving an opportunity for gold to attract some flows if the dollar softens as the global bond market selloff extends.

“The dollar is slightly softer today [Friday], but that doesn’t mean it is ready to lose its crown. Gold could still remain vulnerable to further downward pressure if inflation does not show further signs of peaking next,” he wrote.

For other precious metals, silver shed 0.5 percent to $22.40 per ounce, platinum was down 2.6 percent to $955.26 per ounce, while palladium lost 2.6 percent to $2,130.83 per ounce.