Gold Held Amid Fed Interest Rate Expectations
Gold prices held steady on Friday (June 26th) after experiencing pressure over the past three weeks. Despite a slight gain, the precious metal remains on track for a weekly decline as the US dollar remains strong and expectations of a Federal Reserve interest rate hike continue to loom over the market.
Spot gold prices rose 0.3% to around US$4,036.88 per troy ounce, while US gold futures gained 0.1% to US$4,051.30. However, gold still has the potential to decline nearly 3% weekly, while it has already corrected by around 11% so far this month.
The main pressure comes from the US dollar, which remains near a 13-month high and is headed for its second consecutive weekly gain. A stronger dollar makes gold more expensive for buyers using other currencies, thus suppressing demand for the precious metal.
The greenback is supported by growing expectations that the Fed could raise interest rates again this year. US Personal Consumption Expenditures (PCE) inflation data released Thursday showed that price pressures remain high. PCE rose 4.1% annually in May, the highest reading in more than three years and returned above 4% for the first time since 2023.
The market is currently still pricing in the possibility of a Fed rate hike in September. Higher interest rates are typically negative for gold because the precious metal offers no yield. When bond yields and the dollar strengthen, investors tend to prefer interest-bearing assets to gold.
However, gold's decline was restrained by geopolitical risks in the Middle East. Investors continued to monitor developments after a cargo ship was reportedly attacked near the Strait of Hormuz. The incident reminded the market that security risks to global energy routes have not completely disappeared, despite the initial peace agreement between the United States and Iran.
The attack briefly sparked safe-haven demand for gold. However, the geopolitical push was not strong enough to offset pressure from the US dollar and expectations of high interest rates. Therefore, gold's movement remained limited despite renewed tensions in the Middle East.
In other precious metals markets, silver edged up 0.1% to US$57.96 per ounce, but was still headed for a weekly decline of around 12%. Platinum rose 1% to US$1,618.23 per ounce, but remained on track for its seventh consecutive weekly decline.
Meanwhile, copper prices also weakened. The benchmark copper contract on the London Metal Exchange fell 0.4% to US$13,249.33 per ton, while US copper futures weakened 0.2% to US$6.06 per pound. This weakening indicates that pressure is not limited to gold but is also spreading to several other metal commodities.
Going forward, gold's direction will still depend heavily on the movement of the US dollar, Treasury yields, and expectations for Fed policy. If the dollar remains strong and the likelihood of an interest rate hike persists, gold is at risk of further pressure. However, if US economic data begins to weaken or geopolitical risks increase, gold still has the potential to receive support from safe-haven demand. (arl)
Source: Newsmaker.id
