Gold prices hovered near one-month lows on Friday, displaying resilience in the face of cooler-than-anticipated U.S. inflation data for the previous month. Despite a 0.2% uptick to $1,916.53 per ounce by 0727 GMT, the precious metal traded close to its lowest point since July 7, reflecting the current challenges it faces. U.S. gold futures remained stable at $1,948.80.
A brief glimmer of hope emerged for gold on Thursday, witnessing a 0.8% uptick in response to data revealing that the U.S. consumer price index (CPI) had risen less than initially projected in July. This development led to increased speculation that the Federal Reserve is unlikely to raise interest rates further in 2023.
It is worth noting that a rise in interest rates usually prompts an increase in bond yields, consequently elevating the opportunity cost of holding non-yielding assets like gold.
However, Matt Simpson, a senior analyst at City Index, pointed out, “Once the CPI dust had settled, markets seemed to remember that core CPI at 4.7% is still not great – even if it was slower than expected.” Simpson highlighted that the uptick in gold’s value lacked a strong conviction. He cited comments by Fed member Mary Daly, who introduced a note of uncertainty by stating that the decision to hold or raise rates at the Fed’s upcoming meeting is yet to be determined. This statement led to a resurgence in the strength of the U.S. dollar.
The past week saw gold prices decline by approximately 1.3%, coinciding with the fourth consecutive weekly gain in the U.S. dollar index and benchmark 10-year Treasury bond yields. This development reinforced a macroeconomic equilibrium, combining moderated inflation with robust labor data, thereby reducing the attractiveness of gold as a safe-haven asset. Furthermore, this scenario supports the notion of higher rates over an extended period, as outlined by ANZ analysts.
While spot silver displayed a marginal 0.2% rise to reach $22.72 an ounce, and platinum experienced a 0.6% increase, reaching $912.04, both precious metals remained on track for their fourth consecutive weekly losses.
On a positive note, palladium observed a 0.3% increase to $1,290.43, potentially achieving its most favorable week since mid-June. This development signals a glimmer of hope amidst the broader downward trajectory in precious metal prices.
