The price of gold fell more than 1% this Friday and sinks to its worst level since April 2020, due to a cocktail of factors: from the strength of the dollar and the high yields of US bonds to the concern for more increases of interest rates in the United States.
By midday Friday, spot gold was down 1.48% at $1,656.15 an ounce, on track for its second straight weekly drop, and U.S. gold futures were down 0.5% at $1,672.10.
“Renewed dollar strength is pushing gold lower. The near-term outlook for the gold market continues to be questioned as the market looks for a spike in the dollar and especially in yields,” said Ole Hansen, chief strategist. of Saxo Bank commodities.
The dollar gained 1.21%, hitting a new two-decade high against rivals and making bullion less attractive to holders of other currencies. The yield on US 10-year Treasury bonds hit an 11-year high.
Several central banks, including the US Federal Reserve and the Bank of England, raised rates this week to rein in inflation and stoked concerns of a global recession.
Although gold is considered a safe investment in times of political and financial uncertainty, rising rates reduce its appeal as it does not earn interest.
“The weakness in gold is because the dollar is stronger and yields are a bit higher…the general view from the Fed is for more rate hikes, which is going to put a cap on gold,” he said. Bob Haberkorn, Senior Market Strategist at RJO Futures.
In other precious metals, spot silver was down 3.3% at $19.01 an ounce; palladium fell 3.6% to $2,091.91; and platinum fell 2.7% to $875.97. All three metals were headed for a weekly decline.
“The 10-year Treasury note rate shows an increase of 6.7 basis points, reaching 3.78% and reaching a maximum of 3.8248%, its highest level since April 26, 2010. Yesterday, the expectation of a more restrictive monetary policy and the risks for economic growth caused the inversion of the yield curve of Treasury assets to deepen,” said Gabriela Siller, director of economic analysis at Banco Base.
Industrial metals also show significant declines, as copper fell 3.73% to $7,450 per metric ton and aluminum, nickel and zinc lost 2.38%, 5.55% and 2.77%, respectively.
With information from Reuters