Gold prices increased marginally on Friday. However, they should have concluded the week down as hawkish remarks from Federal Reserve officials raised the dollar’s chances of more interest rate increases and hurt copper due to worries about the growing COVID-19 cases in China.
After rocketing to a close to a three-month high earlier this week, gold prices saw some profit-taking. Early this week, fears of an escalation in the Russia-Ukraine conflict fuelled demand for haven assets, such as the yellow metal. Still, a de-escalation in tensions quickly reversed this. Gold futures were up 0.2% to $1,766.20 an ounce by 01:02 ET, while spot gold increased 0.2% to $1,764.27 an ounce (06:02 GMT). This week, both instruments should lose roughly 0.3%.
Rate Hikes and the Market of Gold
Gains earlier this week were abruptly reversed by the strengthening of the dollar and Treasury yields after several Fed speakers said that while the central bank will raise rates at a slower rate in the months ahead, it is not about to stop doing so. James Bullard, president of the St. Louis Fed, most recently stated that the central bank must continue raising interest rates because its actions have only had limited effects on observed inflation.
Bullard said that to stop price pressures, the Fed’s target rate must increase by at least 150 basis points. His remarks came after this week’s stronger-than-anticipated retail sales figures revealed that inflation would probably stay persistent in the foreseeable future.
While October’s U.S. inflation decreased more than anticipated, according to statistics released earlier this month, price pressures were still much higher than the Fed’s 2% annual objective. Metal markets should suffer in the coming months due to the central bank’s announcement that getting inflation closer to its target is its top priority.