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Gold Prices Volatile as Dollar Retreats and Fed’s Hawkish Outlook Collide

The Federal Reserve’s aggressive view on interest rates, which was tempered by support from the dollar’s general decline this week, caused gold prices to fluctuate on Friday as investors balanced their bets.

Prior to a 0.1% weekly decline, spot gold nudged up 0.1% to $1,958.83 per ounce around 12 p.m. EDT (1800 GMT). U.S. gold futures almost exactly held their value at $1,971.20.

According to Edward Moya, senior market analyst at OANDA, “this is difficult for gold because you have stocks that are continuing to rise and more hawkish Fed speak.”

Because everyone is investing in equities, it looks that the markets are convinced that the Fed is nearly through tightening, which is reducing demand for safe havens. [.N]

In their initial remarks after this week’s meeting, U.S. central bank policymakers adopted a hawkish stance in response to a Fed report stating that inflation in significant segments of the service sector “remains elevated and has not shown signs of easing.”

According to the CME’s FedWatch tool, traders now see a 74% likelihood of a rate rise in July, which weighs on the attraction of zero-yield bullion.

The hawkish remarks seemed to undermine Thursday’s support from the dollar and the dismal unemployment claims statistics. Gold remained vacillating between positive and negative territory.

On the other hand, according to Phillip Streible, chief market analyst at Blue Line Futures in Chicago, “weakening employment and other foreign currencies working against the U.S. dollar right now provide some tailwinds for gold.”

The dollar index increased a little, but it was still on track for its worst week in five months, making gold less expensive for purchasers from outside. [USD/]

The University of Michigan poll, which revealed that U.S. consumers’ expectations for near-term inflation fell to a more than two-year low in June and that the prognosis for the next five years marginally improved, was also considered by traders.

Platinum decreased 0.3% to $982.62 while silver increased 1% to $24.10 per ounce, both down for the week.

Palladium saw its highest weekly advance since November as it increased 1.6% to $1,422.03.



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