Metals Stocks: Gold futures end lower after ECB spells out path to higher rates, dollar climbs

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Gold prices fell on Thursday following back-to-back gains after the European Central Bank said it would raise interest rates in July for the first time in more than a decade, while also putting a larger half-point increase on the map for September, unless high inflation in Europe starts to recede.

Trading in the U.S. remained lackluster ahead of May inflation data due out Friday.

Price action

Gold futures for August
GCQ22,
-0.31%

GC00,
-0.31%

fell 0.2%, or $3.70, to settle at $1,852.80 an ounce on Comex.

Silver futures expiring in July
SIN22,
-1.51%

SI00,
-1.51%

shed 1.2% to close at $21.82.

Palladium futures for September
PAU22,
-1.31%

PA00,
-1.31%

fell 1.1% to end at $1,915.60.

Platinum futures for July
PLN22,
-3.78%

PL00,
-3.78%

fell 3.5% to settle at $975.90.

What analysts are saying

While there weren’t major surprises in the ECB’s policy announcement, Ed Moya, a senior market analyst at Oanda, said a strong dollar has weighed on gold prices as traders increasingly worry about the threat of persistently high inflation globally and slower growth, despite the retreat of easy-monetary policies.

“What we are starting to see is the path in Europe is going to be a little bit mixed,” Moya said, by phone. “They are going to have to be tough on inflation, but they also might need to use tools to deal with significant widening in Italian debt.”

See: The ECB signals it will end era of negative interest rates as it prepares first rate hike since 2011

Still, the big item on the agenda remains Friday’s reading on U.S. inflation for May. “There hasn’t been a lot of strong positioning ahead of the report,” Moya said, adding that gold investors still could face the risk of a surge in Treasury yields, if the inflation report surprises. “There has been a lot of concerns that we might not be done pricing in Fed tightening.” Surging bond yields can weigh on non-yielding have plays like gold.

Naeem Aslam, chief market analyst at AvaTrade, said markets largely have been expecting U.S. inflation to have reached its peak level, “and if that is the case, then the Fed is likely to stay on autopilot in relation to their monetary policy, and we could see higher moves for the gold price.”

Looking at technical indictors, the “bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00,” wrote Kitco Senior Analyst Jim Wyckoff.

Other markets

In other markets, U.S. equities
SPX,
-0.93%

turned lower, with the S&P 500 off 0.7% to trade near 4,086. The Dow Jones Industrial Average
DJIA,
-0.66%

was down 0.5% to 32,741. The 10-year Treasury yield
TMUBMUSD10Y,
3.036%

rose to 3.03%.

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