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Investing.com – Updated at 17:46 GMT
Spot gold prices are now recording $1,968 an ounce, a decrease of 0.59%. While gold futures contracts fell to $1,985 an ounce, a decrease of 0.58%.
This comes in light of the rise of the dollar index to the level of 102.233, an increase of 0.40%.
Markets continue to price in the Fed’s 25 basis point interest rate hike.
As one of the heads of the Federal Reserve spoke, the most important statements were as follows:
Boston Fed President Susan Collins said there was “more work to be done” to bring down inflation and that while it was “probable that we will see at least some” credit tightening as a result of the recent banking turmoil, it will be important to watch the data.
“What history has told us is that you need conditions tight enough to suppress inflation, and that the Fed has to stay the course and not back down,” Collins said in an interview Friday on Bloomberg Television.
Collins spoke minutes after the latest reading on US inflation, which missed expectations.
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Updated at 12:11 GMT
Investing.com’s Fed Tracker indicates that the Fed will likely raise interest rates by 25 basis points at the next May meeting, bringing the rate range to 5.00%-5.25%.
The interest rate hike will reflect negatively on gold. As the interest (return) rises on the dollar index, which makes it attractive over gold, which is considered a store of value without return.
Expectations continue to rise despite the decline in inflation.
Gold now records $ 1,978 an ounce in spot transactions, and the level of $ 1,996 an ounce in futures transactions.
Updated at 12:50 GMT
Inflation data came in contrary to expectations, below the expected and below the previous reading. Which means that the Fed succeeded in reducing inflation, which makes it likely that the path of raising interest rates will not last for long.
On this basis, gold prices went up, to record spot transactions at $1,981 an ounce, and futures transactions to rise above $2,000 an ounce, then to fall back below the critical level again.
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Updated at 11:58 GMT (30 minutes before the release of the PCE data).
The price of gold in futures transactions managed to rise to the level of $1,999 an ounce, and now stands at $1,997 an ounce. Whereas, spot gold records the level of $1,980 an ounce. The rise remains capped by the strength of the dollar index today, which is gaining strength from the weakness that afflicted after the positive inflation data for the eurozone.
The technical vision for gold now appears as follows:
Although gold prices, today, Friday, did not witness huge rises or falls, they are on their way to their best month in more than two and a half years, as global banking turmoil increased bets that it will ease the pace of raising gold prices.
Gold prices are hovering during these moments of today’s trading near the 2000 levels, but they are now retreating and moving away from these levels.
However, this price volatility stems from investors anticipating today’s PCE data, which is the Fed’s preferred indicator for determining the path of inflation in the US.
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Gold and the dollar now
It fell by 0.2% at 1976 dollars an ounce.
While US gold futures fell 0.2% to 1993 dollars.
It rose by 0.22%, to record 102.05 points.
Solid gold
The precious metal is heading for its second straight quarterly gain, up 8.6% so far.
It is heading for a second straight quarterly loss, making gold cheaper for overseas buyers.
The safe-haven metal crossed the $2,000 mark after the sudden collapse of two US regional lenders earlier this month, fueling bets that the Federal Reserve may pause interest rate hikes to stem potential contagion in the global banking system. But prices fell after the authorities launched rescue measures.
Markets see a 48.5% chance that the Fed will hold interest rates in May, and that could boost gold’s attractiveness.
“There is speculation that the banking crisis may not be over yet, but the problems are not visible or affecting the markets at the moment… Therefore, gold is holding between $1930 and $2000,” said Ilya Spivak, head of macroeconomics at Tasty Life.
Spivak added that gold faces downside risks because the market expects the Federal Reserve to temporarily stop raising interest rates, which contradicts what the US Central Bank says and may contradict upcoming data.
gold when settling yesterday
Gold prices rose to the highest level in about a year when dealings settled, yesterday, Thursday, after the release of economic data and with an assessment of the prospects for monetary policy.
Yesterday’s data revealed a reduction in the US economic growth estimate in the fourth quarter of last year to 2.6% from 2.7% in the previous reading, while initial jobless claims rose by 7 thousand to 198 thousand in the week ending on the twenty-fifth of March.
Upon settlement, gold futures contracts for June delivery increased by 0.7%, equivalent to $ 13.20, to record $ 1997.70 an ounce, which is the highest settlement since March 2022.
What about gold?
Unrest in the banking sector and concerns about the economy led to gold prices reaching $2,000 an ounce for the first time in a year, but the question remains, will gold continue to rise or turn lower?
The most traded jumped about 8% to $1,984.50 this month, hitting an intraday high of $2,014.90 last week and on track for the biggest monthly percentage increase since July 2020. Prices have not exceeded $2,000 since Russia’s invasion of Ukraine last spring, according to the newspaper. Wall Street Journal.
However, recent gains have raised concerns that a banking crisis could push the economy into recession.
Meanwhile, investors’ rush to safer investments has pushed down government bond yields, adding to gold’s relative attractiveness. The drop in yields also weakened the dollar slightly, making gold — which is priced in dollars — less expensive for foreign investors, according to the Wall Street Journal.
However, the banking turmoil heralds a pause in the Federal Reserve’s campaign to increase interest rates, which could lead to further gains for gold.
Recent Fed statements
“Not everyone should think that every banking fall means a repeat of the Lehman Brothers disaster,” said Thomas Barkin, a member of the US Federal Reserve. Meanwhile, Parkin supports a 25 basis point rate hike at the next meeting
He added, “It is too early to determine the size of the impact resulting from the pressures of defaulting on the banking system, whether at the level of credit or inflation.”
And he continued, “The Fed should be very quick in assessing the size of the effects of the banking crisis on inflation.”
On the other hand, the chairwoman of the Federal Reserve Bank of Boston said that the central bank is likely to raise interest rates once more this year.
“Inflation remains very high, and recent indications confirm my view that more work is needed to slow inflation toward the 2% target,” Suzanne Collins said in a speech to be delivered at the National Association for Business Economics meeting.
Collins indicated that she supported the Federal Reserve’s decision last week to raise interest rates by 25 basis points to a range of 4.75% and 5%.
Meanwhile, Fed member Neel Kashkari said, “Once inflation drops, we can go back to a pre-pandemic economy with low inflation, low unemployment and decent wage growth.”
“The vast majority of banks have taken interest rate risk very seriously,” he continued.
He added, “The US Federal Reserve is ready for higher interest rates to continue for a longer period than expected.”
