Gold down a third straight session to end at lowest price since March

By Myra P. Saefong and Joseph Adinolfi

Gold prices fell toward a key $1,900 mark on Thursday to settle at the lowest since March as Federal Reserve Chair Jerome Powell’s recent comments in Sintra, Portugal, and in Madrid, Spain, weighed on the yellow metal.

Strength in the U.S. dollar and Treasury yields, as upbeat U.S. economic data released Thursday raised the possibility of a July interest-rate hike by the Fed, contributed to gold’s loss.

Price action

Market drivers

The positive final revision for first quarter U.S. GDP to 2%, along with a drop in jobless claims, point to a July interest-rate hike by the Federal Reserve, and that pressured gold prices, said Jeff Wright, chief investment officer at Wolfpack Capital.

Against that backdrop, the ICE U.S. Dollar index rose 0.4% to 103.31, while the yield on the 10-year Treasury BX: TMUBMUSD10Y was at 3.852%, up from 3.711% Wednesday afternoon.

Wright said he believes a 25 basis-point rate increase is “almost a certainty for July, but not a more aggressive increase as the PCE price index was slight under at 4.1% vs. 4.2% estimates.” Inflation is “still elevated but showing some measure of control,” he said.

For now, he does “not see a case or rationale to hold any gold or gold securities in the portfolio,” with the risk-free rate of short-term U.S. Treasurys yielding over 5%.

Still, Peter Spina, president of GoldSeek.com, told MarketWatch that gold may be “finishing off its pullback here,” as the market is hitting or very close to seeing the “Summer doldrum lows” being established.

“We can expect gold to start drifting back higher and preparing itself for another attempt at record price highs as we move into the last two quarters of 2023,” said Spina. “This is the time to buy when sentiment has gone weak.”

Prices for gold on Tuesday and Wednesday declined, with the drag lower extending to Thursday. Investors “assessed the main message coming from this week’s Sintra conference — that more policy tightening is on the way — and decided to punish the metal further,” said Fawad Razaqzada, market analyst at City Index and Forex.com, in emailed commentary.

Read:Powell and other central bankers vow to keep fighting inflation until there is evidence of success

Gold prices have been sliding since hitting their second-highest level on record in early May as central bankers, including Powell, have signaled that they plan to raise interest rates even higher to quash inflation, which remains well above targets set by central bankers around the world.

Gold reached the second-highest settlement on record for a most-active contract when it finished at $2,055.70 an ounce on May 4. The highest settlement level on record for the yellow metal arrived on Aug. 6, 2020, when prices finished at $2,069.40 per ounce, according to Dow Jones Market Data.

For the month, as well as the quarter, to date, prices for the metal look to register declines. But as gold falls toward the $1,900 level, analysts including Razaqzada have suggested that bargain hunters might swoop in, keeping gold from falling further and perhaps sparking a modest rebound.

-Myra P. Saefong

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06-29-23 1438ET

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