Gold experienced a significant decline on Thursday (May 18) as worries about the US Federal Reserve’s potential interest rate increase and the strength of the dollar impacted the market.
Closing at $1,959.80 per ounce, gold futures contracted by $25.10 or 1.26 percent, reaching the lowest closing level since March 27, 2023. Similarly, silver futures fell by 26.40 cents, or 1.10 percent, settling at $23.633 per ounce. Platinum futures also experienced a decline of $24.40, or 2.25 percent, ending at $1,058.20 an ounce. Finally, palladium futures dropped by $34.70, or 2.3 percent, concluding at $1,450.20 per ounce.
The decline in gold futures can be attributed to the strength of the dollar, which made gold contracts, priced in dollars, more costly for investors using other currencies. The dollar index, measuring the greenback against a basket of six major currencies, rose by 0.68 percent to 103.5793 overnight.
Furthermore, concerns regarding the Federal Reserve’s potential interest rate hikes have added pressure to the market. The release of robust US labor data, indicating a decrease of 22,000 in initial jobless claims to a seasonally adjusted 242,000 last week, below analysts’ expectations of 254,000, has fueled these concerns.
According to the latest CME Group’s FedWatch Tool, investors are currently considering a 36.7 percent probability of the Fed raising interest rates by 0.25 percent to a range of 5.25-5.50 percent at its June 13-14 meeting. This figure reflects a significant increase from last week’s estimation of only 10.7 percent.
As investors monitor the evolving landscape, the market remains cautious and anticipates the Federal Reserve’s upcoming decisions regarding interest rates, which are expected to have a significant impact on the future of gold and other precious metals.
The Spot Market is Open
Friday, May 19, 2023