Gold Slips as Investors Prepare for Fed’s Jumbo Rate Hike

(Bloomberg) — Gold headed back down after posting the biggest weekly gain since May as investors weighed prospects for tighter US monetary policy and concerns over an economic slowdown.

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Bullion hit the lowest level since March 2021 last week, only to rebound as Treasury yields eased following poor US economic data. After raising rates in June by the most since 1994, Federal Reserve policy makers are expected to approve another 75 basis-point hike when they meet July 26-27. Second-quarter GDP data will also indicate whether the US is in a technical recession.

Gold is heading for a fourth monthly loss as Fed tightening and a stronger dollar dim its allure as a haven, overshadowing concerns about inflation and a slowdown. Over the weekend, while former Treasury Secretary Lawrence Summers cast doubt on the likelihood of a soft landing for the US, incumbent Janet Yellen said that she doesn’t see any sign the economy is in a broad recession.

Additional downward pressure on gold has come from waning investor interest, with holdings in bullion-backed exchange-traded funds ebbing for a sixth week, according to initial data compiled by Bloomberg. Hedge funds trading the Comex flipped to being net-short on gold for the first time since 2019, according to data from the Commodity Futures Trading Commission.

“Shanghai traders are accumulating silver,” TD Securities commodity strategy head Bart Melek said in an emailed note. “In sharp contrast to gold, where outflows from most major participants have translated into a liquidity vacuum.”

Spot gold fell 0.5% to $1,719.46 an ounce at 1:52 p.m. in New York. Last week, prices sunk as low as $1,680.99 on Thursday before ending the week 1.1% higher. The Bloomberg Dollar Spot Index weakened 0.1%. All other precious metals fell except platinum. Silver went 0.8% into the red. Spot palladium lead with a 1.4% fall.

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