Gold futures were in a holding pattern Wednesday, after flipping between small gains and losses earlier in the session, following back-to-back gains that helped the yellow metal bounce from a three-month low.
A soaring U.S. dollar has kept pressure on the yellow metal, with jittery investors instead turning to the greenback and Treasurys given recent volatile markets sparked by a reversal of the Federal Reserve’s easy-money stance and fight against high inflation.
U.S. Treasury Secretary Janet Yellen on Wednesday warned of a “challenging, and uncertain” global economic outlook, due to higher food and energy prices that can depress output, spending and raise inflation “all around the world,” at a news conference in Germany, ahead of a meeting with leaders of some of the world’s biggest economies.
But Yellen also said the U.S. was “in many ways is best positioned,” given its strong labor market and economy and its releases of strategic oil reserves to help domestic energy prices from skyrocketing higher.
Despite recent gains for gold, prices still were almost 5% lower so far in May, according to FactSet. They also remained 11.1% below their March 8 high of $2,040.10, for the most-active contract, according to Dow Jones Market Data.
“We attribute the price slide on the one hand to higher bond yields in the wake of good U.S. economic data —- yields on 10-year U.S. Treasuries have risen to 3% again. And on the other hand, Fed Chair [Jerome] Powell’s hawkish remarks are likely to have played their part,” said Daniel Briesemann, commodity analyst at Commerzbank, in a note.
Higher yields raise the opportunity cost of holding nonyielding assets.
Powell, speaking at a Wall Street Journal event on Tuesday afternoon, said the Fed would keep raising interest rates until there was “clear and convincing evidence” that inflation was coming down. Powell said that, if necessary, the Fed wouldn’t hesitate to push rates past “broadly understood levels of neutral” to bring down inflation. The neutral rate is the level at which policy neither boosts nor slows economic growth.
Powell said that the fight against inflation could cause some pain in terms of economic growth or a tick up in unemployment but that “plausible” pathways remained for a “softish” landing.
In other metals trade, July copper
fell 1.7% to $4.17 a pound.