Gold prices stall, but head for weekly gain

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gold bars

On Friday, gold prices eased as markets geared up for more aggressive central banks to curb worldwide mounting inflation.

Subsequently, bullion contracts for June 22 dropped 0.61% or 12.20 points to $1,972.50 per troy ounce. Then, the spot gold declined 0.24% or 4.69 points to $1,973.55 per troy ounce.

Nevertheless, the safe-haven demand triggered by the Russia-Ukraine crisis kept bullion on track for a weekly gain.

It currently posts a one-week increase of 1.51%. At the same time, it trades 8.00% higher since the start of the year.

Accordingly, central banks now race up to combat the surging inflation, taking a hit on gold. 

For instance, on Wednesday, New Zealand reinforced its position as one of the world’s most hawkish central banks. It elevated the cash rate by 50 bps to 1.50%, the most significant rise.

The move also represented the fourth hike in the current cycle. The RBNZ also maintained its forecast for rates to peak around 3.35% by end-2023.

Likewise, the Bank of Canada raised key rates by 50 bps to 1.00%. This hike is the biggest single move in more than two decades. The BoC will also let maturing bonds roll off its balance sheet next week. 

Conversely, the European Central Bank stayed on its plans to dial back stimulus this year. Its dovish move weighed worries over record-high inflation. This cautiousness could drive the eurozone economy into recession.

Meanwhile, analysts noted that policymakers must also guard against the fallout from Russia’s invasion. The hit to consumer confidence from soaring energy prices and disrupted supply chains would darken the economic outlook, constraining monetary tightening.

Then, the US dollar index strengthened 0.19% to 100.51, making gold expensive for overseas buyers. 

Gold and other precious metals

Gold is a hedge against inflation and geopolitical risks. However, interest rate hikes raise the opportunity cost of holding non-yielding bullion.

Like the yellow metal, silver futures for May 22 ticked 0.02% or 0.01 points to $85.86 per troy ounce. Yet, it is on track for a 3.20% weekly gain, which would be its best since early March.

Conversely, palladium contracts for June 22 increased 0.28% or 6.50 points to $2,346.00 per troy ounce. Regardless, it is still 3.00% lower for the week so far.

Eventually, platinum futures slightly jumped 0.15% or 1.50 points to $991.10 per troy ounce. The precious metal is on the course for its first weekly gain.

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