Gold futures closed lower on Tuesday (March 22) as markets came under pressure as U.S. Treasury bond yields hit a three-year high and the U.S. Federal Reserve (Fed) considered raising interest rates by more than 0.25% to fight inflation.
- The gold contract was down $8, or 0.41%, at $1,921.5 per ounce.
- Silver was down 40.9 cents, or 1.62%, at $24.904 an ounce.
- The platinum contract was down $19.6, or 1.88%, at $1,025.1 an ounce.
- Palladium fell $60.80, or 2.4%, at $2,476.50 an ounce.
Gold contracts will be pressured by a rise in U.S. Treasury bond yields, which will increase the opportunity cost of owning gold. Gold, after all, is an asset that does not yield interest.
The yield on the 10-year U.S. Treasury bond rose to 2.385%, its highest level since May 2019.
Powell said Monday at the U.S. National Association of Business Economics meeting that the U.S. labor market is very strong, but inflation is too high. That’s why the Fed needs to take measures to stabilize prices again, he said. Further, if it deems it necessary, the Fed will raise interest rates by more than 0.25% at one or more meetings.
Goldman Sachs predicted that the Fed will raise rates by another 0.50% at its May and June meetings after Powell signals.
Meanwhile, St. Louis Fed President James Bullard said yesterday that the Fed needs to accelerate rate hikes to curb inflation. Bullard was previously the only Fed representative to vote for a 0.50% rate hike at the March 16 Federal Reserve meeting.
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Wednesday, March 23, 2022