Gold futures ended higher Monday, following the sharpest weekly decline for bullion since November, a slide that helped to bring the commodity’s value to a six-week nadir.
“The precious metal suffered a sharp reversal in fortunes last week, going from challenging $1,850 an ounce to sinking below the psychologically important threshold of $1,800,” wrote Rupert Rowling, market analyst at Kinesis Money.
April gold GC00, +0.73% GCJ22, +0.73%, which is now the most-active futures contract, rose $9.80, or nearly 0.6%, to settle at $1,796.40 an ounce.
Prices for the metal declined last week, with the “hawkishly digested” Federal Reserve “the major driver, as the combination of a renewed upswing in the dollar, slower growth, and potentially fading inflation pressures as a function of new FOMC policy estimates weighed on both industrial (slower growth) and precious
metals (easing inflation),” said analysts in Monday’s Sevens Report Research newsletter.
Read: Powell says Fed ‘ of a mind’ to raise interest rates in March to fight high inflation
Gold futures logged a 2.5% weekly decline on Friday and marked the lowest settlement since Dec. 15 based on a most-active contract, according to Dow Jones Market Data. For the month, they lost 1.8% — the biggest monthly percentage decline since September.
“The two main drivers of the market this week are likely to have a contrasting impact on gold,” Rowling wrote.
Bullion has been supported by concerns about conflict between Ukraine and Russia, but those tensions have been seen subsiding somewhat.
“Any sign of further escalation in tensions over Ukraine is likely to be supportive for gold as investors seek out haven assets in a flight to safety,” wrote Rowling.
However, the prospect of rising rates across the globe have served as a headwind for nonyielding precious metals such as gold and silver.
Atlanta Federal Reserve President Raphael Bostic told the Financial Times that a 0.50 percentage point increase to benchmark federal funds could be warranted if inflation pressures continue to intensify, comments that may help to bolster the belief that the central bank may need to be aggressive to tamp down pricing pressures. Market-based projections are already pointing to three or four interest-rate increases of 25 basis points in 2022.
Kansas City Fed Chief Esther George said Monday that the central bank should raise interest rates soon and pursue a big reduction in its nearly $9 trillion stockpile of bonds. However, San Francisco Fed President Mary Daly on Monday said the Fed’s coming rate increases should be “gradual and not disruptive.”
Other central banks, including the U.K.’s, also are expected to lift their benchmark rates, which will weigh on demand for bullion.
“While the Bank of England’s likely rate hike would be detrimental for gold as it would be further confirmation that global interest rates are on the rise, making the non-yield bearing asset of gold less attractive,” the Kinesis Money analyst wrote.
Silver for March delivery SIH22, +0.80% added 9 cents, or 0.4%, to $22.393 an ounce, following a 8.3% weekly decline put in on Friday. Prices lost 4.1% for the month.
Silver, like gold, has fallen out of favor with the metal, “now trading comfortably below $23 an ounce,” said Rowling. “For now, silver’s movements have fallen back into line with gold so its next move is likely to follow its golden brother on what is set to be a volatile week on markets.”
Among other metals traded on Comex Monday, March copper HGH22, +0.64% climbed by 0.3% to $4.325 a pound, ending the month with a 3.1% decline. April platinum PLJ22, +1.74% tacked on 1.4% to $1,020.80 an ounce, for a monthly rise of nearly 5.7%. March palladium PAH22, -0.71% settled at $2,355.80 an ounce, down 0.8% for the session but about 23% higher for the month.