Gold futures declined on Wednesday as the U.S. dollar found its footing following a brief pullback, dragging prices for the metal back down to their lowest settlement in more than 15 months.
- Gold futures GCQ22, -0.71% GC00, -0.71% for August delivery fell $10.50, or 0.6%, to settle at $1,700.20 an ounce. That was the lowest finish for a most-active contract since March 30, 2021, FactSet data show.
- Silver futures SIU22, -0.36% SI00, -0.36% for September delivery lost 5 cents, or 0.2%, at $18.668 per ounce.
- Platinum PLV22, -1.86% for October delivery declined by $12.40, or 1.4%, at $846.50 an ounce, while Palladium PAU22, +0.18% for September delivery added $7.40, or 0.4%, at $1,861.60 an ounce.
- Copper HGU22, +0.85% for September delivery rose 3 cents, or 1%, to $3.325 per pound.
What analysts are saying
A softer dollar “offered the precious metal some breathing room earlier in the week, but bears are clearly in the vicinity,” said Lukman Otunuga, manager, market analysis at FXTM. The ICE U.S. Dollar index DXY, +0.36% was 0.5% higher in Wednesday dealings, putting pressure on dollar-denominated prices of gold.
Although gold is seen as a hedge against inflation, it remains “under the mercy of rate-hike expectations thanks to its zero-yielding nature,” said Otunuga. “Investors have cut bets on how aggressive the Federal Reserve may be when raising interest rates this month,” but the high interest rate environment is “likely to dim the precious metals allure.”
For now, “it feels like gold is waiting for a fresh directional catalyst to pierce below the $1,700 psychological support,” Otunuga said.
Meanwhile, a team of currency analysts at ING said the greenback’s recent retreat was inspired by a recovery in risk sentiment which helped U.S. stocks achieve their strongest daily gain in a month, while small cap stocks notched their best day in 18 months.
“Our view is that even if the dollar did bottom out in the past week, the path to a sustained depreciation remains challenging, and would most likely be very gradual from this point on,” the team wrote.
The big question now is whether gold can hold above $1,700 after the yellow metal declined for five straight weeks through Friday.
“” Gold, and every market for that matter, is reacting to the stark reality of a Fed seemingly intent to tighten into a recession.” ”
— Brien Lundin, Gold Newsletter
“Gold, and every market for that matter, is reacting to the stark reality of a Fed seemingly intent to tighten into a recession,” said Brien Lundin, editor of Gold Newsletter.
“The next catalyst for the metal will be the first hints from the Fed that it is at least easing its tightening program, to be followed by a full retreat once the higher rates and ballooning debt service costs start to hit the federal budget,” he told MarketWatch. The Fed may be forced to “loosen the reins by early Fall,” he said, adding that’s when he expects the next substantial rally for gold.