Gold prices witnessed a noticeable decline during trading today, Friday, recording their lowest levels since mid-July, and are heading towards recording monthly losses for the second month in a row. This decline comes amid pressures imposed by the rise in crude oil prices and continued inflationary fears, which have strengthened expectations that the US Central Bank will raise new interest rates.
In spot transactions, the price of gold fell by 0.6% to reach $3,995.42 per ounce, breaking the $4,000 barrier, after earlier touching its lowest level since July 17. US gold futures for December delivery also fell by 0.6% to record $4,005.50, bringing the yellow metal’s total decline to about 3.8% since the beginning of this month.
In this context, Giovanni Stanovo, an analyst at UBS Bank, explained that gold prices are affected by a combination of two main factors: These are the release of stronger-than-expected US GDP data, and rising oil prices, which pressures the Federal Reserve to continue raising interest rates.
Official data issued on Thursday showed that the US economy grew at a pace that exceeded expectations during the past quarter, coinciding with the acceleration of inflation rates last September due to increased consumer spending on gasoline and other goods. These indicators contributed to strengthening economists’ expectations of approving a new increase in interest rates during the December meeting. Data from the CME Fed Watch tool indicate that traders are pricing in a probability approaching 74% that the US Federal Reserve will raise interest rates in December.
Despite these near-term pressures, Stonovo expressed a positive outlook for gold, expecting the precious metal to rise to levels of $5,000 or more next year, claiming that the Federal Reserve will eventually be forced to cut interest rates again, with the inflation crisis receding.
This comes at a time when major central banks refrained from raising interest rates during their meetings this week, but sent messages that the monetary tightening cycle has not yet reached its finish line. Both the Federal Reserve and the European Central Bank kept interest rates unchanged, warning at the same time of inflationary risks resulting from rising energy costs.
On the other hand, oil prices continued to rise today, Friday, heading towards achieving gains for the fourth month in a row, following the attack that targeted a tanker in the Strait of Hormuz, which re-highlighted the geopolitical risks threatening energy supplies as a result of the US-Israeli war on Iran. High energy levels play a major role in fueling expectations of continued monetary tightening and interest rates remaining high for a longer period, which limits the attractiveness of non-yielding assets such as gold.
As for other precious metals, the rest of the metals followed the decline. The price of silver in spot transactions fell by 2.8% to record $50.9221 per ounce, platinum fell by 3.1% to $1441.72, while palladium fell by 2.1%, recording $984.50. Thus, the three metals are heading towards recording collective losses on the weekly and monthly levels.
