Gold prices declined on Thursday, ending below $1,950 an ounce, a day after the Federal Reserve’s policy decision to increase rates to the highest level in 22 years. Fed staff also now view a U.S. recession as avoidable.
Data Thursday showed stronger-than-expected U.S. second-quarter growth, contributing to a rise in the dollar and Treasury yields, while pulling prices for the precious metal to the lowest in more than two weeks. Price action
-
Gold for August delivery
GC00,
-1.32% GCQ23,
-1.32%
fell $24.40, or 1.2%, to settle at $1,945.70 per ounce on Comex, the lowest closing level for a most-active contract since July 11, according to Dow Jones Market Data. -
Silver futures for September delivery
SI00,
-2.80% SIU23,
-2.80%
shed 60 cents, or 2.4%, settling at $24.37 per ounce, the lowest finish for a most-active contract since July 12. -
October platinum
PLV23,
-3.06%
declined by 2.8%, to $945 per ounce, while palladium for September delivery
PAU23,
-1.66%
fell 1.5% to $1,236.6 per ounce. -
Copper for September delivery
HGU23,
-1.38%
closed at $3.8755 per pound, down 0.7%.
Market drivers
A better-than-expected reading on second-quarter U.S. gross domestic product boosted both long-term Treasury yields and the U.S. dollar index, all “bearish factors for gold,” said Michael Armbruster, managing partner at Altavest.
The U.S. economy grew at a 2.4% annual pace in the second quarter. Analysts had forecast a 2% increase in GDP.
Treasury yields popped across the curve “as expectations for a Fed rate cut have been pushed back, raising the US dollar and dropping gold,” Louis Navellier, chief investment officer and founder of Navellier & Associates, wrote Thursday, in a client note.
Strong U.S. GDP data gives the Fed “more fire power in relation to the interest-rate decision, which means that they need to be less concerned about the economic weakness” from increases in rates, Naeem Aslam, chief investment officer at Zaye Capital Markets told MarketWatch. “This has brought more strength to the dollar and hence the gold price has experienced a move to the downside.”
The ICE U.S. Dollar Index
DXY,
a closely watched gauge of the dollar’s value against other major currencies, was up by 0.8% at 101.65 in recent trade. The yield on the 10-year Treasury
TMUBMUSD10Y,
was also at 4%, up from 3.850% Wednesday afternoon.
Gold prices pushed higher on Wednesday afternoon as the U.S. dollar and Treasury yields weakened, after Fed Chairman Jerome Powell left open the question of further interest rate rises this year, after lifting the Fed’s policy rate by a quarter percentage point, bringing its range to the highest level in 22 years.
Read: Why gold prices climbed after the Fed’s decision to raise interest rates
Armbruster said Altavest is still a longer-term gold bull, viewing Thursday’s dip in prices as “likely a buying opportunity.”
“We anticipate the economy slowing down and Treasury yields dropping in coming months. We are in the hard landing camp,” he said. Gold prices tend to advances in times of recession.
—Joseph Adinolfi contributed reporting
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