Jakarta, CNBC Indonesia – World gold prices were again sluggish on Friday (6/5/2022), as the United States (US) dollar and US Treasury yields strengthened amid the hawkish attitude of the US Federal Reserve (The Fed).
According to Refinitiv, as of 11.15 WIB, the price of gold in the spot market fell slightly by 0.01% daily to a position of US$ 1,876.70/troy ounce. Yesterday, gold prices also slumped 0.22%.
Indeed, since touching the level of US$ 1,978.49/troy ounce on April 18, 2022, gold prices have tended to weaken. In a week, for example, the price of the yellow metal has fallen 1.04%.
The US dollar index also touched a 20-year high of 103.928 on Thursday (28/5/2022) last week. Meanwhile, US Treasury yields rose again after hitting their highest level since November 2018 in the previous session.
Yield The 10-year A bond rose 12 basis points to 3.04% in afternoon trade local time. However, yield 10-year tenor bonds had touched the highest level at 3.106% and became the highest level since 2018. The same thing happened to yield The 30-year bond jumped 12 basis points to 3.126%.
For information, movement yield the bond is inversely proportional to its price, when yield goes up, means the price goes down.
The US central bank (Federal Reserve / The Fed) announced an increase in the benchmark interest rate by half a percentage point on Wednesday (4/5) afternoon local time, which was the biggest increase since 2000 and in line with market expectations.
The Fed also outlined its plans to start reducing its balance sheet in June.
However, Fed Chair Jerome Powell said that a 75 basis point hike is not something the Federal Open Market Committee (FOMC) is actively considering. So that, yield 10 year tenor bonds fell at the same time.
Apart from the Fed, investors are also waiting for the release of US jobs data on Friday evening Indonesia time.
“I wouldn’t be surprised to see the release of the (US employment) wage figure above any other consensus, and this may not be good for gold as the market will read that as a sign of an increased chance of a 75 basis point rate hike at the July FOMC meeting,” Stephen said. Innes, Managing Partner at SPI Asset Management, quoted by Reuters.
As is well known, gold does not offer a yield, unlike, say, bonds. Therefore, the yellow metal tends to be unattractive to investors when interest rates rise.
The Future Will Be Bright?
On the other hand, analysts from Bloomberg IntelligenceMike McGlone in his May outlook suggests commodity prices will move with very high volatility, and gold will benefit.
“Commodities are going to be very volatile this year, like in 2008, those developments will make gold shine,” McGlone said as quoted by Kitco, Wednesday (4/5/2022).
“In the last 10 years the commodity index has increased by 50%, while the producer price index has increased by 30%. This increase will shrink as the world faces a potential recession and the Fed (US central bank) raises interest rates to coincide with the peak of inflation,” he added.
McGlone sees gold prices will shoot back above US $ 2,000/troy ounce as market participants begin to see the end of the era of the Fed’s rate hikes.
“The current low of gold prices is around US $ 1,800/troy ounce, with key resistance at US 4 2,000/troy ounce. It’s only a matter of time before gold trades above that resistance,” added McGlone.
CNBC INDONESIA RESEARCH TEAM
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