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Gold prices are falling, approaching the lowest level in two weeks

  • 22 November, 2021
  • 5:12 pm EET

Gold prices fell in trading on Monday, approaching its lowest level in two weeks, affected by the rise of the dollar.

This comes amid expectations that the US Federal Reserve will speed up the pace of stimulus cuts to curb rising inflation risks.

 

Gold Prices Today

The price of gold futures contracts -December delivery- decreased by 0.22%, to record the level of $1850.30 an ounce.

On the other hand, the price of spot delivery of the yellow metal increased by 0.05%, to record $ 1846.73 an ounce.

At the same time, the price of silver futures contracts – for December delivery – rose by 0.63%, to $ 25 an ounce.

The spot platinum price also increased by 0.76%, to record $ 1042.07 an ounce, while the spot palladium price rose by 0.55%, to reach $2,072.57 an ounce.

Gold prices reached their lowest level since November 10 earlier in the session, after comments from Federal Reserve Vice Chairman Richard Clarida, which indicated that the US bank would introduce the idea of ​​reducing its asset purchases at its next meeting in December.

 

Reduce Purchases

Federal Reserve policymakers are publicly debating whether they should scale back asset purchases more quickly; One of the most influential US Federal Reserve officials indicated that the idea would be on the table at the upcoming Fed meeting.

Higher rates generally translate into an increased opportunity cost of owning the metal, which pays no interest.

 

Gold Market Situation

“In the short to medium term, gold fundamentals look good because the real (inflation-adjusted) yields are very negative, but eventually we will get tighter monetary policy and gold will go lower in the bigger picture,” said Rhoda Kael, analyst at IG Markets. .

“There is also a growing sense that the United States and China will intervene to lower oil prices, which is one of the biggest drivers of inflation expectations, and this has influenced gold’s momentum around its role as an inflation hedge,” he added.

Adding to the pressure on bullion was a stronger dollar index; This made bullion more expensive for holders of other currencies.

 

US Bonds

Chief market analyst Jeffrey Haley, argues that with inflationary pressures only being reflected in US short-term bond prices; Only more officials jumping into a faster narrative, or a sudden upward move in long-term US yields, is likely to derail gold prices.

Haley said a move towards $2,000 in gold before the Federal Reserve meeting in December could not be ruled out.

Also on the investors’ radar were the appointment of US President Joe Biden as the new chair of the Federal Reserve, and the return of Corona restrictions in parts of Europe.

The White House said there will be more details about President Joe Biden’s selection as the next Fed chief this week.

 

Interest Rates

German central bank chief Jens Weidmann publicly contradicted the European Central Bank’s official line on Friday, warning that inflation could remain above 2% for some time and that the ECB should avoid any commitment to keep the money taps open.

Raising interest rates reduces the attractiveness of bullion; Higher rates increase the opportunity cost of the non-interest bearing metal.

On Friday, the US Commodity Futures Trading Commission said speculators increased their net positions in COMEX gold futures and options, while net long positions in silver increased on COMEX.

Actual demand for gold declined in major Asian centers, last week, although Indian traders are looking forward to the upcoming wedding season to renew interest in bullion.

 

SOURCE : BLOOMBERG

 

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