Gold prices down a second week as recession fears drive copper to biggest weekly loss in a year

Inflation would normally push gold higher, but there’s a question over whether this is inflation in the “traditional sense,” or rather a “huge imbalance of supply and demand” resulting from the aftershock of the pandemic and the zero-COVID policy implemented in many Asian countries, he told MarketWatch.

The U.S. dollar, meanwhile, is up big since last year, he said. That pressures dollar-denominated prices of gold.  And as for the Fed, Chairman Jerome Powell is “doing his best to combat this man-made inflation resulting from COVID but…when rates rise, we can’t expect gold to flourish,” said Koos.

Given all of that, gold ended lower for the week, and trades lower year to date, he said.

Gold fell for the week as investors worry that aggressive monetary policy tightening from the Federal Reserve will slow the economy down. That has driven the dollar higher for the month.

“The combination by the U.S. FOMC to raise rates at an accelerated pace leads to higher risk free yields via U.S. [Treasurys], which gold can not compete with as a non-yield bearing vehicle,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.

Silver saw a bigger weekly loss than gold, with losses stemming from Federal Reserve Chair’s Jerome Powell’s assertion on Capitol Hill this week that the central bank will get inflation under control and keep raising rates to meet that goal, Rupert Rowling, market analyst at Kinesis Money, told clients in a note.

“It was the prospect of central banks needing to adopt more hawkish monetary policies that sparked silver’s initial price plunge back in mid-April. From that point on the precious metal has struggled to find any support with the metal now trading close to its lowest in almost two years,” Rowling said.

Meanwhile, global recession fears have hit copper hard this week, with the commodity poised for its biggest weekly loss in more than a year.

“Chile’s mining giant Codelco has reached an agreement with workers to end a strike that could have led to a price supportive reduction in supply. Below $3.86, the next key level of support can be found at $3.50/lb, the 50% retracement of the 2020 to 2022 rally,” said Ole Hansen, head of commodity strategy at Saxo Bank, in a note to clients.

In economic data Friday, the final survey of U.S. consumer sentiment, produced by the University of Michigan, showed a decline to an all-time low of 50 in June. American’s expectations for overall inflation over the next year held steady at 5.3%, while expectations for inflation over five years ticked up to 3.1%.

Inflation expectations data from the University of Michigan’s consumer sentiment index were part of the reason the Fed hiked by 75 basis points instead of 50 at its June meeting.