Gold Futures Settle Lower As Dollar Extends Rally Ahead Of Fed Policy

Gold prices fell on Tuesday, pushing the most active gold futures contract to a more than 4-week low, as the dollar and Treasury yields continued to climb higher ahead of the Federal Reserve’s monetary policy announcement, due on Wednesday.

The Fed is widely expected to hike interest rate by 50 basis points. Goldman Sachs and JPMorgan Chase & Co. said they expect the Fed to raise interest rates by 75 basis points.

The central bank’s accompanying statement is expected to provide clues about future rate hikes and policy stance.

The Bank of England is seen raising interest rates by a modest 25 basis points on Thursday despite Monday’s data showing a contraction in the country’s GDP in April.

The yield on U.S. 10-year Treasury note surged to about 3.45%. The dollar index surged to a fresh two-decade high at 105.46 today.

Gold futures for August ended lower by $18.30 or about 1% at $1,813.50 an ounce, after falling to a low of $1,809.20.

Silver futures for July ended down by $0.301 at $20.954 an ounce, while Copper futures for July settled at $4.1565 per pound, down $0.0550 from the previous close.

In U.S. economic releases today, data from the Labor Department showed producer prices increased 0.8% month-on-month in May 2022, following a 0.4% rise in April.

The producer price index for final demand less foods and energy rose 0.5% percent from a month earlier in May of 2022, accelerating from a downwardly revised 0.2% gain in the prior month. Year-on-year, core producer prices rose by 8.3%, easing from a revised 8.6% increase in April.

Annual producer inflation in the US edged slightly lower to 10.8% in May of 2022 from 10.9% in April and a 21-year high of 11.5% hit in March.

According to a report from the National Federation of Independent Business, the NFIB Small Business Optimism Index in the U.S. edged down to 93.1 in May of 2022, the lowest since April of 2020, and compared to 93.2 in April.

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