Gold prices fell in Friday's trading session and are heading for their second consecutive week of decline as interest rate outlook in the US continues to put pressure on the precious metals market.
Spot gold prices fell 0.33% to 4,462.67 USD/ounce at 3:45 PM Vietnam time. Over the week, the precious metal lost about 1.6% of its value. Meanwhile, gold futures for August delivery in the US fell 0.4% to 4,487.90 USD/ounce.
According to experts, cautious sentiment in the market is increasing as investors increasingly believe that the US Federal Reserve (Fed) may maintain a tough monetary policy longer than expected to control inflation.
Mr. Nicholas Frappell - Global Organization Market Director at ABC Refinery said that the general trend today is that the market is expecting the interest rate level to remain higher, thereby putting pressure on gold.
The latest statements from Fed officials also reinforce this view.
Mr. Jeffrey Schmid – Chairman of the Kansas City Federal Reserve Bank said that the current choice of the Fed is to continue to patiently keep interest rates unchanged or consider raising interest rates if inflationary pressure persists.
Meanwhile, Ms. Mary Daly – President of the San Francisco Federal Reserve Bank said that the direction of interest rates will depend on the developments of the economy. According to her, monetary policy is currently in a suitable state and the Fed is ready to adjust if economic conditions change.
Although gold is often seen as an inflation hedging tool, high interest rates reduce the attractiveness of precious metals because this is an asset that does not yield yields.
According to CME's FedWatch tool, the market is currently assessing the possibility of the Fed raising interest rates before the end of the year, with a probability of about 51% for an interest rate hike in December.
The focus of investors' attention is now shifting to the US non-farm payroll report in May, expected to be released later in the day. The report results are expected to provide more signals about the health of the US economy as well as the monetary policy orientation of the Fed in the coming time.
In the physical gold market, demand in leading consumer countries is still quite sluggish. In India, many buyers continue to stand aside and observe due to strong fluctuations in international gold prices. Meanwhile, gold insurance premiums in China also tend to decrease.
Other precious metals also simultaneously weakened. Spot silver prices fell 1.8% to 72.53 USD/ounce, platinum fell 0.8% to 1,885.83 USD/ounce and palladium fell 0.8% to 1,309.91 USD/ounce. All three metals are heading towards a week of price declines.
