Gold prices are rising… and the yellow metal is heading to record weekly losses

  • 03 December, 2021
  • 5:45 pm EET

Gold prices rose in trading on Friday, as investors awaited the stance of the US Federal Reserve, which is heading to be tough on reducing stimulus and increasing interest rates.

The yellow metal appears to be on its way to a third consecutive weekly decline, weighed down by indications from US Federal Reserve officials that the US bank may end its pandemic-era asset purchases and raise interest rates faster than expected to combat rising inflation.


Gold Prices Today

The price of gold futures contracts for February delivery increased by 0.27%, to reach the level of $1,767.50 an ounce.

While the price of spot delivery of the yellow metal decreased by 0.9%, to record 1767.20 dollars an ounce.

At the same time, the price of silver futures contracts – for March delivery – rose by 0.18%, to $ 22.30 an ounce.

The spot platinum price rose 0.27%, recording $943.25 an ounce, and the spot palladium price rose 1.1%, to $18,033.45 an ounce.


US Fed Moves

Gold prices are down 1.4% so far during the week, with indications by US Federal Reserve officials that the bank intends to speed up stimulus measures.

Chairman Jerome Powell said the decision could be reached at the next policy meeting.

Atlanta Federal Reserve Bank President Rafael Bostic added Thursday that it would be appropriate to end the bond-buying program by the end of March, to allow the Fed the option of raising interest rates to deal with inflation.

For his part, analyst at IG Markets, Kyle Rhoda, indicated: “The US Federal Reserve appears to be more hawkish, especially with the emergence of the new Corona mutant Omicron, which is pushing traders to buy the dollar, this is a negative environment for gold,” Reuters reported.


Mutant Omicron

The coronavirus mutant Omicron has raised concerns about the pace of the economic recovery, weighing on risk sentiment.

Investors’ focus will turn to the US non-farm payroll report due out at 01:30 PM GMT (04:40 PM GMT).

The number of Americans filing new claims for unemployment benefits rose less than expected last week, indicating tightening labor market conditions, while layoffs declined in November.

“If there are signs that job growth is solid and wage growth is still improving, that adds to the calls that the Fed will have to increase the tapering pace, throwing its weight on gold,” Rhoda said.

Lower stimulus and higher interest rates tend to push up government bond yields, raising the opportunity cost of holding gold without interest.


Dollar Strength

“Although rising bets for faster monetary tightening and a stronger dollar present downside risks, inflation is likely to remain elevated until 2022 and this should support gold in the medium term,” said Suganda Sachdeva, Vice President of Commodity and Currency Research at Realgar Brokerage.

US Treasury Secretary Janet Yellen said the Fed’s job is to ensure that the current run of high inflation does not develop into a “harmful, long-term spiral”.

While inflation in the Eurozone remains temporary, two European Central Bank policymakers argued Thursday, even as US officials raised the issue this week to abandon the use of “temporary” to describe current price pressures.





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