Gold prices fell in the European market on Friday to their lowest level in 2023, specifically the lowest level in seven weeks, about to incur a weekly loss, due to the strong performance of the US dollar in the global currency exchange market, which is supported by broad bets about the continuation of the Federal Reserve in raising interest rates for the longest period. this year.
Those bets that increased on a large scale this week, thanks to the US economy’s continuous disclosure of more strong data, which show the extent of flexibility enjoyed by the largest economy in the world, which led to the receding of fears about its slip into stagflation.
Gold prices today
Gold metal prices decreased by about 1.0% to $1,818.87, the lowest since December 30, 2022, from the opening level of trading at $1,836.74, and recorded the highest level at $1,836.79.
Throughout this week’s trading, gold prices are still down by 2.5% so far, and are about to incur a second loss in the last three weeks, due to the rise of the US dollar and returns, and weak demand for non-yielding assets.
On Friday, the dollar index rose by more than 0.4%, to extend its gains for the third consecutive session, recording the highest level in six weeks at 104.54 points, reflecting the continuation of the broad rise in the levels of the US currency against a basket of major and minor currencies.
As we know that the rise of the US currency makes gold bullion priced in US dollars less attractive to buyers who hold other currencies.
The yield of US Treasury bonds for ten years rose today by more than 1.5%, to extend its gains for the fourth consecutive session, recording the highest level in three months at 3.927%, about to trade again above the 4.00% barrier, which enhances investment opportunities in the US dollar. .
These developments come, thanks to the US economy continuing to disclose more strong data, which show the extent of flexibility that the largest economy in the world currently enjoys, and reduce the possibility of it slipping into stagflation this year.
This data increases pressure on monetary policy makers at the Federal Reserve Board to continue to tighten monetary policy and raise interest rates for as long as possible, and it also moves bets on the peak level of US interest rates from 5.25% to 6.0%.
Data showed this week, consumer prices in the United States recorded better readings than economists’ estimates during January, and retail sales recorded a rise that exceeded expectations in January, with producer prices recording better readings than market expectations, and with an unexpected drop in orders. Weekly unemployment benefit.
Several Fed policymakers indicated this week that more interest rate increases are needed to bring inflation down to the central bank’s 2% target.
Cleveland Federal Reserve Bank President Loretta Mester said she now sees a compelling economic case for a 50 basis point rate hike again, and St Louis Federal Reserve Bank President James Bullard said he wouldn’t rule out supporting a 50 basis point increase instead of 25. Basis point in the next March meeting.
Those statements and comments raised the futures pricing for the odds of a 25 basis point hike in Fed interest rates next March to about 100%, and raised the futures pricing for the odds of a 50 basis point hike in March this week from 9% to 15%.
It also raised futures pricing for the odds of the Fed raising interest rates by 25 basis points in May from 68% to 77%, and the odds of a rate hike of 50 basis points in May from 9% to 17%.
Opinions and analytics
Financial markets strategist, Ilya Spivak, said that this week’s data showing strong US retail sales and high consumer prices seem to be fueling a re-evaluation.
Gold holdings of the SPDR Gold Trust, the largest global index fund backed by gold, remained unchanged yesterday, with the total remaining at 921.08 metric tons, the highest level in a week.