On Thursday (May 25), gold futures plummeted to a nine-week low and closed in negative territory for the fourth consecutive day as the resurgent US dollar continued to exert downward pressure on the markets.
Investors remained vigilant, awaiting the release of the US Personal Consumption Expenditure (PCE) price index, a crucial indicator that could offer insights into the Federal Reserve’s (Fed) stance on interest rates.
Gold contracts for June delivery experienced a decline of $20.90, or 1.06%, settling at $1,943.70 per ounce. This marked the lowest closing level since March 21. Silver futures also faced a downturn, dropping by 33 cents, or 1.42%, to $22.91 per ounce. Platinum futures followed suit, declining by $3.20, or 0.31%, to $1,026.30 per ounce. In contrast, palladium futures witnessed a modest increase of $14.50, or 1.3%, reaching a closing price of $1,415.60 per ounce.
The primary factor behind the gold market’s slump is the relentless strength of the US dollar, which makes gold contracts, denominated in dollars, more expensive for investors using other currencies. The dollar index, which measures the greenback against a basket of six major currencies, recorded a gain of 0.34%, rising to 104.2424 overnight.
Michael Hewson, an analyst at CMC Markets UK, noted, “The dollar has displayed strength over the past few days as concerns about a potential US debt default prompt investors to seek refuge in the safe-haven currency. Particularly as Fitch Ratings has assigned a negative outlook to the US Credit Watch and cautioned about the possibility of downgrading the current AAA credit rating of the United States. We anticipate that if the dollar continues to strengthen, it may push the price of gold down towards $1,900.”
Market participants are closely monitoring the release of the US Personal Consumption Expenditure (PCE) price index for April. This index holds great significance for the Fed’s assessment of inflation, as it provides insights into changes in consumer behavior and encompasses a broader range of prices for goods and services compared to the Consumer Price Index (CPI) data.
The interplay between the robust US dollar, ongoing debt ceiling concerns, and inflation data will continue to influence the direction of gold prices in the near term. Investors are expected to remain cautious as they navigate the evolving market dynamics and weigh the impact of these factors on their investment strategies.
The Spot Market is Open
Friday, May 26, 2023