Gold prices end lower as investors weigh prospects for Fed interest rates

Price action

• Gold for August delivery
  GC00,
  +0.89%

  GCQ23,
  +0.89%
  fell $2.40, or 0.1%, from Monday’s settlement to end Wednesday at $1,927.10 an ounce on Comex. There were no price settlements on Comex Tuesday because of the Fourth of July holiday.

• September silver
  SI00,
  +1.88%

  SIU23,
  +1.88%
  added 29 cents, or nearly 1.3%, to $23.402 per ounce.

• September palladium
  PAU23,
  +0.61%
  rose by $30.90, or 2.5%, to $1,257.90 per ounce, while October platinum
  PLV23,
  +1.04%
  gained $9, or 1%, to $925 an ounce.

• Copper for September delivery
  HGU23,
  +1.33%
  fell by 3 cents, or 0.7%, to $3.7685 per pound.

Market drivers

Gold futures edged down in electronic trading to $1,926 shortly after the Fed minutes were released Wednesday afternoon, pressured as a summary of the June Fed discussions showed that an unspecified number of central bank officials had called for an interest-rate hike.

At the end of that meeting, however, officials unanimously voted to hold the Fed’s its benchmark interest rate steady for the first time in over a year, but senior officials at the time also indicated another 50 basis points of rate hikes are on the table if inflation didn’t slow more rapidly.

Investors are now expected to look to the June U.S. employment data for further guidance on the Fed’s path for interest rates, analysts said.

A robust U.S. jobs report is “likely to deal a heavy blow to the zero-yielding metal, sending prices back below $1,900, with $1,893 and $1,858 acting as key levels of support,” said Lukman Otunuga, manager, market analysis at FXTM, ahead of Wednesday’s Fed minutes.

On the other hand, should gold prices push back above $1,932, with bulls gaining further support from a soft U.S. jobs report, this could open the doors back toward $1,959 and $1,985, respectively,” he said in market commentary.

Gold prices had finished a bit higher on Monday, ahead of Tuesday’s holiday.

“Fragile market confidence and a dip in equities on the back of concerns about the health of the global economy has seen investors keen to keep hold of their safe haven gold assets,” said Rupert Rowling, market analyst at Kinesis Money, in emailed commentary shared with MarketWatch.

Downbeat economic data released in the U.S., China and elsewhere in the past few days has helped to revive demand for gold, although the Fed and other central banks around the world are planning more interest-rate hikes.

In China, the Caixin private survey of the services sector showed activity slowed in June at a much faster pace than expected.

A barometer of U.S. manufacturing health released on Monday contracted for the eighth month in a row and sunk to its lowest level since May 2020, falling to 46% in June from 46.9% in the prior month. However, orders for U.S. manufactured goods rose 0.3% in May, the Commerce Department said Wednesday. This is the fifth gain in the past six months.

“China is the latest country to publish underwhelming economic data and investors are concerned that central banks’ aggressive stance to curb stubbornly high inflation will tip economies into recession,” Rowling added.

Gold prices have fallen over the past two months as the prospect of higher interest rates benefits the U.S. dollar, which tends to have an inverse relationship with gold.

The ICE U.S. Dollar Index
DXY,
-0.87%,
a gauge of the dollar’s strength versus other major currencies, was up 0.13 at 103.36 in Wednesday dealings.