Gold futures climbed on Friday as investors await next week’s monthly reading on the U.S. consumer price index, which is likely to be a key factor in the Federal Reserve’s interest-rate decision at its meeting later this month.
Prices for the precious metal, however, remained on track for a weekly loss in the face of overall strength in Treasury yields and the U.S. dollar.
Price action
-
Gold for December delivery
GC00,
+0.48% GCZ23,
+0.48%
rose $8.10, or 0.4%, to $1,950.60 an ounce on Comex. Prices based on the most-active contract were set for a 0.8% weekly fall, FactSet data show. -
December silver
SIZ23,
+0.69%
gained 11.5 cents, or 0.5%, to trade at $23.355, but was headed for a weekly decline of nearly 5%. -
December copper
HGZ23,
-1.01%
fell 1.1% to $3.722 a pound. -
Platinum for October delivery
PLV23,
-0.79%
traded at $904.60 an ounce, down 0.6%, while December palladium
PAZ23,
-0.21%
tacked on 50 cents to trade at $1,215.50 an ounce.
Market drivers
Gold on Friday looks to recoup some of the losses that prompted prices to mark their lowest settlement in nearly two weeks on Thursday.
Strong U.S. economic data and a rally in oil prices to 2023 highs pushed up Treasury yields and strengthened the U.S. dollar this week on worries the Federal Reserve will need to raise interest rates further or leave them elevated for an extended stretch.
Rising yields can be a negative for gold, raising the opportunity cost of holding a nonyielding asset, while a stronger dollar makes commodities priced in the unit more expensive to users of other currencies.
“The latest U.S. service-sector activity data among other releases have supported the argument around the Fed having headroom to hike one more time,” Lukman Otunuga, manager, market analysis at FXTM, told MarketWatch. With the dollar and Treasury yields “likely to rise on growing Fed hike bets, this may keep the gold prices capped moving forward.”
Still, Rupert Rowling, market analyst at Kinesis Money pointed out that while gold has pulled back from a high above $2,000 an ounce seen earlier this year, the $1,920 level remains very high historically.
“The key factor that has kept gold so buoyant despite rising interest rates has been the fragility of market confidence but the longer the economic data continues to show that recession fears are overdone, the more trading activity will shift towards riskier assets and away from the ultimate haven asset in gold,” Rowling wrote in a Friday note.
Looking ahead, the “next big event” for gold, as well as the dollar, is the U.S. August CPI data next week, which could influence the Fed’s decision whether to hike further or not, said Fawad Razaqzada, market analyst at City Index and FOREX.com. See the U.S. economic calendar.
The market appears to believe that the interest rate hikes are done, but expect rates to “remain at current levels longer than they had previously been expecting,” and that has helped to boost the dollar and weigh on dollar-denominated gold prices, he said.
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