Gold Prices Set for Worst Week in Almost a Month as Dollar and Treasury Rates Rise

19 Jan 2024 , 10:29 AM

As the dollar and Treasury rates rose on Friday, amid evidence of economic resiliency, U.S. central bankers resisted the anticipation of an early rate decrease, setting the stage for gold prices to have their worst week in almost a month.

Spot gold had increased by 0.1% to $2,023.52 an ounce. But this week, it has dropped 1.2% already. Futures for US gold increased by 0.2% to $2,025.40.

Although down 0.2% for the day, the US dollar index has increased by about 1% so far this week. For holders of foreign currencies, gold valued in greenbacks becomes more expensive due to a stronger dollar.

The benchmark 10-year Treasury note yield on the market reached a new five-week high of 4.1632%.

According to data released on Thursday, unemployment claims in the United States decreased last week to its lowest point since late 2022, indicating that January job growth was probably stable.

President of the Atlanta Federal Reserve Raphael Bostic stated that although the baseline was for rate reduction to begin in the third quarter, he was open to lowering rates sooner than he had anticipated, depending on how quickly inflation decreases.

According to LSEG’s interest rate probability software, IRPR, markets were betting on 139 basis points of Fed rate reduction this year, down from 150 bps a week earlier.

According to IRPR, the likelihood of a Fed rate cut in March has decreased from roughly 71% last week to 54%.

Holding bullion has a lower opportunity cost when interest rates are lower. It was far too soon to talk about policy easing, the European Central Bank cautioned in the minutes of its most recent meeting.

Palladium increased by 0.8% to $945.24, platinum increased by 0.2% to $908.65, and spot silver increased by 0.1% to $22.76 per ounce.

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