In a week marked by significant fluctuations in the financial markets, gold futures closed on Friday with a notable decline of $2.30, amounting to 0.1%, settling at $1,946.60 per ounce. This decline marks the most substantial weekly loss since late June. The dip was largely attributed to the simultaneous strengthening of the US dollar and a surge in US Treasury yields, both of which pressured the precious metal. These developments were further influenced by the release of the Producer Price Index (PPI) figures by the United States.
Throughout the week, gold prices experienced a downtrend, culminating in an overall decrease of nearly 1.5%. This decline represents the most significant weekly drop since the week ending on June 23. Silver futures also faced a modest decline of 8 cents, equivalent to 0.3%, with a closing price of $22.74 per ounce. Similarly, platinum futures saw a reduction of 20 cents, or 0.2%, ultimately settling at $914.60 per ounce. In contrast, palladium futures managed a slight uptick, rising by $3.60 or 0.3%, with a closing value of $1,309.10 per ounce.
A prevailing factor in the decline of gold futures this week was the release of data indicating inflation in the United States slowing more than expected. Despite this, concerns regarding the potential for continued increases in Treasury yields and the US dollar dampened demand for gold contracts. The surging dollar notably elevates the cost of gold contracts for investors transacting in other currencies, as contracts are priced in dollars.
The dollar index, which measures the performance of the US dollar against a basket of six major currencies, witnessed a gain of 0.31%, reaching a value of 102.8426 on Friday.
The 10-year US Treasury note yield experienced an uptick to 4.162% from 4.141% following remarks from San Francisco Fed President Mary Daly. In her statement, she highlighted the Federal Reserve’s substantial task in curbing inflation. Despite recent data indicating a mere 0.2% rise in the US Consumer Price Index (CPI) for July, the anticipation of increased yields contributes to a higher opportunity cost associated with holding gold. This is due to gold’s nature as an interest-free asset.
The Producer Price Index (PPI), a metric gauging inflation based on producer spending, was released by the US Labor Department on Friday. The PPI showed a more significant increase than anticipated by analysts. When accounting for food and energy categories, the PPI rose by 0.8% in July on a year-on-year basis. The headline PPI recorded a 0.3% increase in July, surpassing analysts’ expected 0.2% rise.
Moreover, the core PPI, excluding food and energy components, reported a year-on-year increase of 2.4% for July, outperforming analysts’ consensus of 2.3%. On a monthly basis, the core PPI experienced a 0.3% rise in July, surpassing the expected 0.2% according to analysts’ predictions.
In conclusion, the week saw gold prices facing significant downward pressure due to a strengthened US dollar and rising Treasury yields. Despite data reflecting slower inflation, concerns over potential future economic trends contributed to a decreased demand for gold contracts. These market dynamics serve as a reminder of the intricate balance between economic indicators and their impact on precious metal values.
The Spot Market is Closed
Saturday, August 12, 2023