Gold futures settle with a loss for the week
New York (May 22) Gold futures settled a dime lower on Friday, suffering their first weekly loss in three as traders anticipated a rate hike by the Federal Reserve later this year.
Prices saw pressure from strength in the U.S. dollar as investors reacted to a rise in April U.S. consumer prices and comments from Federal Reserve Chairwoman Janet Yellen regarding the likelihood of a rate increase rate this year.
Gold for June delivery on Comex GCM5, +0.11% lost 10 cents to settle at $1,204 an ounce, while July silver SIN5, -0.27% ended at $17.051 an ounce, down 8.1 cents, or 0.5%.
Prices for gold, based on the most-active contracts, saw a weekly fall of 1.7% after two consecutive weekly gains; silver suffered a 2.9% loss on the week.
“We see a battle in the gold market,” said Taki Tsaklanos, head of research at Secular Investor.
Gold on Friday benefited from a better than expected CPI reading for April in the U.S., while it saw pressure from the U.S. dollar and Yellen’s “determination to raise interest rates later this year,” he said.
The consumer-price index rose 0.1% in April from a month earlier.
U.S. consumer prices rose 0.1% in April, while core prices, which excludes food and energy, rose 0.3%. Gold got an earlier boost following the data as the metal is sometimes used as a hedge against inflation.
But economists said the data leave the Federal Reserve on track to hike interest rates later this year. Although expectations for a hike as early as June were tamped down earlier this week in the wake of minutes from the Fed’s April meeting that suggested that officials were reluctant to hike in June given weak economic reports.
Yellen on Friday said she still expects the central bank to raise rates this year, followed by gradual moves thereafter.
The prospect of higher interest rates has cast a pall over gold, which doesn’t bear any interest, analysts said. Higher interest rates can also contribute to strength in the dollar, which in turn pressures dollar-denominated gold prices.
On Friday, the dollar DXY, +0.84% also strengthened versus the yen USDJPY, +0.43% and the euro EURUSD, -0.9629% in the wake of the upbeat economic data.
In other metals trade, July platinum PLN5, -0.36% fell $3.70, or 0.3%, to $1,148.60 an ounce, down 1.8% for the week, while June palladium PAM5, +1.12% tacked on $7.90, or 1%, to $784 an ounce, losing 1.4% for the week.