Gold Prices Ease on Friday but Set to Gain on the Week

Gold prices went down almost 1% to $2020 an ounce on Friday, as the dollar rebounded slightly and as investors continue to adjust their expectations for the monetary policy and the economic outlook. The Fed is still seen delivering a 25bps hike next month although there are increasing expectations it could pause the tightening cycle after that. Despite Friday’s fall, the bullion is up 0.8% on the week and holds close to levels not seen since March last year, prompted by a weaker dollar, and prospects that major central banks, and especially the Fed, are nearing the end of the tightening cycle. The Monetary Authority of Singapore kept its monetary policy unchanged on Friday, joining other central banks from Australia, Canada, India, and South Korea that already halted rate hikes.

A rally in prices made physical buying unattractive across major Asian hubs, dampening sentiment ahead of a key gold-buying festival in India. In top buyer China, bullion changed hands at premiums of $1-$5 an ounce on spot prices, down from the $26-$40 premiums charged last month. In India, dealers offered discounts of up to $22 an ounce over official domestic prices, versus the $32 discounts last week. India’s gold imports, which have a bearing on the current account deficit, fell about 30 percent to USD 31.8 billion during April-February 2023 due to high customs duty and global economic uncertainties, according to data from the commerce ministry.

Industrial production in the United States rose 0.4% mom in March 2023, beating market expectations of a 0.2% increase after an upwardly revised 0.2% gain in February. The index for utilities jumped 8.4%, with advances for both electric and utilities, as the return to more seasonal weather after a mild February boosted the demand for heating. On the other hand, manufacturing output decreased by 0.5%, more than forecasts of a 0.1% decrease. Capacity utilization in the United States increased to a four-month high of 79.8% in March of 2023, from 79.6% in February and beating market forecasts of 79%. The operating rate for utilities jumped 5.6 percentage points to 75.3% while the one for manufacturing moved down 0.5 percentage points to 78.1% and for mining fell 0.5 percentage points to 91.1%. Capacity utilization is now 0.1 percentage points above its long-run average.