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Gold futures ended lower on Wednesday, with strength in the U.S. dollar contributing to a fall in prices for the precious metal to their lowest in more than two weeks.
Silver, meanwhile, also declined, with prices marking their lowest finish in almost a year.
Price action
-
Gold for August
GC00,
-0.19% GCQ22,
-0.19%
delivery fell $3.70, or 0.2%, to settle at $1,817.50 per ounce. That was the lowest most-active contract finish since June 14, FactSet data show. -
Silver futures
SIU22,
-0.66%
for September delivery lost 13 cents, or 0.6%, to end at $20.738 per ounce, the lowest settlement since July 2020. -
Platinum futures
PLV22,
+0.46%
for October delivery rose $4.30, or 0.5%, to $909.90 per ounce. -
Palladium futures
PAU22,
+4.57%
for September delivery rose $84.70, or nearly 4.6%, to $1,946.60 per ounce. -
Copper futures for September
HGU22,
-0.01%
delivery settled nearly unchanged at $3.7805 per pound.
What analysts are saying
“With a fresh higher high move for the dollar, a fresh lower low…in August gold is not surprising,” analysts at Zaner wrote in Wednesday’s newsletter.
The dollar is likely “garnering interest from economic confidence derived from a pair of U.S. Federal Reserve speeches overnight discounting the prospect of a recession,” they said. However, Fed dialogue remains “squarely on track to continue hiking [interest] rates.”
During a panel discussion at a European Central Bank policy conference Wednesday, Fed Chairman Jerome Powell said the Fed “will not allow a transition from a low inflation environment into a high inflation environment.”
Read: Powell says no guarantee of soft landing for U.S. economy
In short, “economic uncertainty has been tamped down, interest rates are expected to continue to rise, and the dollar seemingly refocused on attractive yields, instead of flight to quality,” the Zaner analysts said. So, “gold and silver are presented with several bearish fundamental factors and have forged breakdowns on the charts.”
On Wednesday, a final reading on first-quarter gross domestic product showed the U.S. economy contracted at a slightly faster clip than previously believed. the final reading showed the U.S. economy shrunk by 1.6%, compared with the 1.5% contraction reflected in the first revision.
That fed fears over a recession, which can provide haven-demand for gold, some analysts have said.
In Europe, the headline reading on German inflation declined in June for the first time since January, but inflation data out of Spain showed price pressures accelerating at their fastest pace in decades. According to preliminary data released by German statistics office Destatis on Wednesday, consumer prices rose 7.6% year-over-year, lower than the 8% forecast by economists in a Wall Street Journal poll. In Spain, the annualized inflation rate in June topped 10%, the highest since 1985.
See: Canaria in the coal mine? Spanish inflation surges a shocking 10.2% to a 37-year high
“Wall Street will likely lean towards anticipating more rate hikes from the ECB, that will drive a weaker dollar, and weakening growth outlooks which should prompt the safe-haven buying of gold,” said Edward Moya, the senior market analyst at OANDA, in a market update.
For now, “gold is still stuck in a wide trading range, but a collapse below the $1,800 seems less likely as the dollar peak might be in place,” he said.
The ICE U.S. Dollar Index
DXY,
a measure of the dollar’s strength against a basket of rivals, edged up by 0.5% at 105.03.
Meanwhile, palladium was a standout on Comex, up nearly 5%.
While the platinum group metals (PGM) markets are not overly sensitive the prospect of minimal PGM supply disruptions in South Africa, “attacks on power plants (from protests) are expected to cause ‘record’ outages and that’s likely providing palladium with some of its gains over the prior four trading sessions,” analysts at Zaner said.
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