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Gold prices fell on Friday, pushing them into the red for the week as a stronger U.S. dollar and higher Treasury yields helped to diminish the yellow metal’s appeal.
Price action
-
Gold for April delivery
GC00,
-0.38% GCG23,
-0.36%
was down $6.40, or 0.3%, at $1,872.10 per ounce on Comex. Based on the most-active contract, prices were down 0.3% for the week, FactSet data show. -
Silver prices for March
SI00,
-0.35% SIH23,
-0.35%
delivery fell 3.3 cents, or 0.2%, at $22.11 per ounce, trading down 1.4% for the week. -
Palladium for March
PAH23,
-5.15%
fell by $68.20, or 4.2%, to $1,548.50 per ounce, while platinum for April
PLJ23,
-0.84%
lost $1.40, or 0.2%, to $962.80 per ounce. -
Copper prices for March
HGH23,
-1.94%
fell by 7.3 cents, or 1.8%, to $4.024 per pound.
Market drivers
Market analysts attributed the weakness in gold Friday on a revived U.S. dollar and higher Treasury yields.
Both the greenback and yields have risen over the past week after U.S. economic data — including the January payrolls report and ISM services sector survey — prompted traders to reevaluate their expectations about where interest rates might peak, and how long the Fed might wait to cut them again.
“Precious metals remained out of favour with gold hovering around $1,860 and silver just above $22.00 as bond yields pushed higher and the dollar remained supported. In recent days, the dollar has come back to life, and has been supported on the dips, in response to the Fed’s hawkish comments and mixed data,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
The ICE U.S. Dollar Index
DXY,
a gauge of the greenback’s strength against a basket of rivals, rose 0.2% to 103.45 in Friday dealings. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose 1.8 basis points to 3.700%.
A stronger dollar makes gold more expensive for buyers in other currencies, while higher yields make bonds comparatively more attractive to gold.
Also, some analysts said traders were reluctant to open new long positions ahead of Tuesday’s U.S. consumer-price index report on inflation.
On Friday, a survey of U.S. consumer sentiment showed a rise in early February to an 11-month high of 66.4, from 64.9 in January, indicating Americans are cautiously optimistic about the economy.
Taking a look at the bigger picture, however, analysts at ICICI Bank pointed out in a research note Friday that gold prices have held onto a gain year to date.
They said they see some “degree of consolidation” for gold in the first half of this year as U.S. yields remained elevated on the back of policy guidance that the Federal Open Market Committee will likely provide.
Even so, they maintain expectations that the FOMC will move to a “pause mode” for interest rates after the May policy meeting and embark on possible rate cuts in the first quarter of 2024. That will “work to push U.S. real yields lower, “driving a pronounced structural uptrend in gold prices” in the second half of this year, the ICICI Bank analysts said.
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