Gold futures ended higher on Friday after a volatile week that saw prices climb to a nearly six-month high but post a weekly decline, pressured by expectations for higher U.S. interest rates.
Price action
- February gold
GCG23,
+0.85%
GC00,
+0.85%
rose $12.40, or 0.7%, to settle at $1,800.20 per ounce on Comex, FactSet data show. Prices based on the most-active contract ended 0.6% lower for the week. - Silver for March delivery
SI00,
+0.45%
SIH23,
+0.45%
rose 2 cents, or 0.1%, to $23.328 per ounce, settling 1.6% lower for the week. - Palladium for March delivery
PAH23,
-5.96%
fell $107, or 5.9%, to $1,706.60 per ounce, with prices down over 13% for the week, while platinum for January
PLF23,
-1.39%
fell $13.20, or 1.3%, to $1,000 per ounce, losing 3.5% this week. - Copper prices for March
HGH23,
+0.19%
ended little changed at $3.7615 per pound, with a weekly loss of 3%.
Market drivers
Gold prices “bounced into the middle of the week, on softer inflation data and hopes the Federal Reserve would be done with interest rate hikes soon,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
The precious metal had rallied to its highest level since June on Tuesday after the November consumer-price index left investors with the impression that the worst inflationary wave in four decades has continued to wane.
However, the “hawkish announcement from the [Federal Reserve] late Wednesday pressured gold as investors priced in a higher terminal interest rate,” Haworth said. The Fed’s latest batch of economic projections suggested that senior Fed officials expect to keep interest rates above 5% until 2024.
Looking ahead, Haworth said higher interest rates and softer inflation data remain headwinds for gold investors.
Higher interest rates typically support the dollar and Treasury yields and make non-yield-bearing assets like precious metals less attractive by comparison.
Interest rates have surged with the dollar, “reducing the appeal for gold as a nonyielding dollar hedge,” said Adrian Ash, director of research at BullionVault.
Still, “this year’s resilience in bullion prices makes a stark contrast with the 2013 crash, and it also contrasts with the worst year in living memory for equity/bond portfolios,” he told MarketWatch.
He believes gold’s value as a portfolio diversifier is likely to gain attention around the new year, “both because of seasonal rebalancing and also because January brings Chinese New Year, now the heaviest single gold-buying festival worldwide.” Those two factors mean that “gold typically sees a strong rise in January.”
Meanwhile, industrial metals such as copper look to end lower for the year.
However, looking ahead, Matthew Miller, equity analyst at CFRA Research, is bullish on industrial metals and neutral to slightly bearish on precious metals.
“As long as real yields are positive and rising, precious metals are likely to underperform,” Miller told MarketWatch.
Read: China’s recovery is key to the 2023 outlook for industrial metals and more
Source: https://www.marketwatch.com/story/gold-prices-rebound-to-pare-their-loss-for-the-week-11671204241?siteid=yhoof2&yptr=yahoo