Gold futures experienced a significant drop, reaching their lowest level in over a week on Wednesday (June 7). Market sentiment was pressured by growing concerns that the Federal Reserve may opt to raise interest rates at its upcoming meeting.
Gold futures fell by $23.10, or 1.17%, to settle at $1,958.40 per ounce. This closing price marks the lowest level observed since May 30. Similarly, silver futures declined by 14.10 cents, or 0.60%, reaching $23.529 per ounce. Platinum futures also experienced a notable drop, falling by $14.10, or 1.36%, to close at $1,024.60 per ounce. Palladium futures followed suit, declining by $23.90, or 1.7%, settling at $1,387.90 per ounce.
The rise in 2-year and 10-year US Treasury yields overnight added to the mounting concerns. The Bank of Canada recently increased interest rates by 0.25% to 4.75%, marking the highest level in 22 years. This move has sparked speculation that the Federal Reserve might also opt for a rate hike during its meeting later this month.
Another factor contributing to the unease among investors is the recent decision by the Reserve Bank of Australia to raise interest rates by 0.25% to 4.10%. This move contradicted analysts’ expectations of keeping rates at 3.85% and further fueled speculation about potential rate hikes by central banks.
According to CME Group’s FedWatch Tool, investors are now placing a 30% probability on the Federal Reserve raising interest rates by 0.25% to a range of 5.25-5.50% at its upcoming June 13-14 meeting. This percentage has increased from the previous 21.8%. Conversely, there is a 69% probability that the Fed will maintain interest rates within the range of 5.00-5.25%, down from the previous 77%.
Moreover, investors are currently assessing a 65% probability of the Federal Reserve implementing a 0.25% interest rate hike at its July meeting.
In the coming days, investors will closely monitor the release of key economic data, including the US Consumer Price Index (CPI) for May on Tuesday, June 13, and the Producer Price Index (PPI) for May on Wednesday, June 14. These indices provide insights into inflation levels based on consumer and producer spending, respectively.
As investors navigate a climate of uncertainty regarding potential interest rate hikes, the precious metals market will remain highly sensitive to any developments that may impact inflation and monetary policy decisions.
The Spot Market is Open
Thursday, June 8, 2023