Stronger Dollar and Rising Interest Rate Expectations Put Pressure on Gold

Gold futures closed Friday (Jan. 28) under pressure from the dollar’s appreciation and fears that the U.S. Federal Reserve may accelerate its rate hikes to curb inflation, even though U.S. economic data were not good.

  • Gold was down $8.4, or 0.47%, at $1,786.6 an ounce.
  • Silver was down 37.5 cents, or 1.65%, at $22.301 an ounce.
  • Platinum contract was down $15.2, or 1.49%, at $1,006.6 per ounce.
  • Palladium was up $8.80, or 0.4%, at $2,375.30 an ounce.

Gold contracts were pressured by the strength of the dollar. The dollar index against the six major currencies in a basket of currencies rose 0.04% to 97.2830 on Friday.

In addition to concerns that the Fed may accelerate its rate hikes to curb inflation, CME Group’s Fed Watch tool indicates that 33% of investors believe the Fed will raise rates five times by 0.25% in 2022, up from the previous estimate of only 22%

5 rate hikes this year would result in short-term rates reaching 1.50% in December from the current 0.00-0.25%.

Moreover, all of the market participants surveyed are certain that interest rate hikes will be announced at the monetary policy meeting in March, which is also the month in which the Fed plans to end QE.

Fed Chairman Jerome Powell said, “The Fed could continue to raise interest rates substantially without affecting the labor market”.

Meanwhile, U.S. economic data released yesterday continues to support gold prices as a safe haven. Data from the U.S. Commerce Department showed that the core personal consumption expenditures (PCE) price index, which excludes the food and energy category, rose 4.9% YoY in December, following a 4.7% increase in November. The PCE index is the Fed’s main gauge of inflation.

The core PCE index rose 0.5% in December, following a 0.5% monthly gain in November.

The general PCE index, which includes food and energy, rose 5.8% in December from a year earlier. This is the largest increase since June 1982, following a 5.7% rise in November.

The Spot Market is Closed

Saturday, January 29, 2022

Metals
Updated at
USD
Bid/Ask
Ounce
Change

Low/High
Gold
05.00
1,791.70
1,792.70
-5.40
-0.30%
1,780.30
1,801.20
Silver
05.00
22.46
22.56
-0.26
-1.17%
22.10
22.91
Platinum
05.00
1,009.00
1,019.00
-11.00
-1.08%
988.00
1,038.00
Palladium
05.00
2,316.00
2,466.00
+8.00
0.35%
2,192.00
2,476.00
Rhodium
05.00
15,750.00
17,750.00
0.00
0.00%
15,750.00
17,750.00

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