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Metals Stocks: Gold prices slip, while recession fears drive copper to biggest weekly loss in a year

Gold prices were headed for a modest weekly loss on Friday, while recession worries continued to weigh on copper, poised for its biggest one-week fall in over a year.

What are prices doing?
  • August gold  GC00, -0.02% GCQ22, -0.02% slipped $1.70, or 0.1%, to $1.828.10 an ounce, following Thursday’s decline of 0.5%. That took it to $1,829.80 per ounce, and was the lowest settlement for a most-active contract in just over a week as of Thursday, according to FactSet data.
  • July silver SI00, +0.16% SIN22, +0.16% fell 16.2 cents, or 0.8%, to $20.88 per ounce, after a drop of 1.8% on Thursday.
  • Platinum PLN22, +0.15%  for July delivery fell $1.90, or 0.2%, to $902.50 per ounce.
  • Palladium  PAU22, +2.38% futures for September delivery rose $33.90, or 1.9%, to $1,858 per ounce.
  • July copper  HGN22, -0.31% fell 5.8 cents or 1.6%, to $3.681 a pound. Prices based on the most-active contract trade nearly 8.4% lower for the week, which would be the largest weekly percentage loss since the week ended June 18, 2021, according to Dow Jones Market Data. On Thursday, prices settled at the lowest in about 16 months.
What analysts are saying

There’s a sort of “world war in the financial markets,” with interest rates, inflation, the U.S. dollar and Federal Reserve among the factions facing each other simultaneously, said Adam Koos, president at Libertas Wealth Management Group.

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 is set to end lower for the week, and trades lower year to date, he said.

Gold is headed for a weekly loss of around 0.7% as investors have fretted 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 is looking a bigger weekly loss of more than 3%, 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.

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