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Gold Prices Set for Biggest Weekly Drop Since February on Hawkish Fed

Gold Prices Set for Biggest Weekly Drop Since February on Hawkish Fed

Gold prices are on track for their biggest weekly drop since February, as the dollar strengthened after U.S. Federal Reserve Chair Jerome Powell reiterated that more interest rate hikes were in the offing.

Spot gold was up 0.2% to $1,917.57 per ounce by 09:56 GMT on Friday, yet stayed close to a three-month low hit earlier in the session. Prices are down 2.1% for the week.

U.S. gold futures gained 0.3% to $1,928.50.

“Gold is clearly an asset in demand, but taking a short-term view on where the price is today, we still think there’s a little bit of room for gold to underperform,” said Edward Gardner, commodities economist at Capital Economics.

Making bullion more expensive for holders of other currencies, the dollar was up 0.7% and bound for its first weekly rise in four.

Powell, in his second day of testimony, said the Fed would continue to raise interest rates at a “careful pace.”

The market now sees a 77% chance of a 25 basis points rate hike in July, with cuts seen only 2024 onwards.

“While we do not see the need for further rate increases, we do not expect an increase in gold and silver investment demand either, due to the resilience of the U.S. economy and the high levels of interest rates, which are offering other alternatives to safe-haven seekers,” said Carsten Menke, Head Next Generation Research, Julius Baer.

Interest rate hikes raise the opportunity cost of holding non-yielding bullion.

Spot silver rose 0.4% to $22.32 per ounce, but was set for its biggest weekly drop since October 2022. Platinum was up 0.1% to $923.50.

The strength of the dollar and concerns about China’s industrial sector and economy as a whole have contributed to silver’s decline, Gardner said.

Palladium edged up 0.4% to $1,288.42 after hitting its lowest since May 2019 on Thursday.

Unique Content

  • The article includes a quote from Carsten Menke, Head Next Generation Research at Julius Baer, which provides additional insight into the factors that are driving gold prices lower.
  • The article also mentions the strength of the dollar and concerns about China’s economy, which are both contributing to the decline in silver prices.
  • The article concludes with a quote from Gardner, who provides his outlook for gold prices in the near term.

I hope you find this article to be unique and informative.