Gold prices retreated on Thursday, May 2, as focus returned to chances of US interest rates staying higher for longer, with traders also positioning for more economic data that could influence the US Federal Reserve’s strategy.
Spot gold fell 0.95 per cent to $2,295.92 per ounce, while US gold futures for June delivery fell 0.25 per cent to $2,305.20 per ounce. Spot silver fell 0.26 per cent to $26.57 per ounce, while spot platinum rose 0.08 per cent to $951.00 per ounce. Spot palladium fell 1.73 per cent to $932.45 per ounce, according to news agency Reuters. Coming to domestic prices, gold futures declined 0.16 per cent lower to ₹70,615 per gram on the multi commodity exchange (MCX).
Why is gold under pressure?
-Analysts say that given the sticky inflationary environment and the relative strength of the dollar, there has been some pressure on the gold market over the course of the last couple weeks. They believe this pullback has not yet run its course.
-The US Fed held interest rates steady on Wednesday and signalled it is still leaning toward eventual reductions in borrowing costs, but flagged a ‘lack of further progress’ on inflation. The Fed’s preferred inflation measure – the personal consumption expenditures price index – increased at a 2.7 per cent annual rate in March, an acceleration from the prior month.
-Market’s attention has now turned to the US non-farm payrolls report due on Friday, and an “extremely strong jobs number” could see the outlook for rate cuts pulled back even further, according to analysts.
-While gold is traditionally considered a hedge against inflation, high interest rates kept by the US central bank to tame the rising prices can increase the opportunity cost of holding the non-yielding bullion.
-Today’s moves in gold to normal chart consolidation after Wednesday’s gains, which were based on notions that while the Fed’s statement leaned hawkish, it was not as hawkish as some might have feared, said analysts.
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