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Gold ends higher for the week, but falls for the month and quarter on strength in the U.S. dollar

By Myra P. Saefong and Joseph Adinolfi

Gold prices post a sixth-consecutive monthly loss

Gold futures climbed on Friday to post a gain for the week, shrugging off rising inflation in Europe and the U.S., as the dollar traded below a 20-year high reached earlier this week.

Overall strength in the U.S. dollar, however, on the back of aggressive monetary policy tightening by the Federal Reserve, as the central bank continues its efforts to tame inflation, pushed dollar-denominated prices for the metal lower for the month, as well as the quarter.

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Gold ended Friday at its highest level in just over a week despite another batch of worrying inflation data out of the eurozone, which showed consumer-prices are rising at their fastest pace since World War II, one day after an inflation report out of Germany revealed something similar.

See:Eurozone Inflation posts new record high of 10.0% in September

Data in the U.S. meanwhile, showed that the personal-consumption price index, a key gauge of U.S. inflation, rose a mild 0.3% in August, but prices are still going up at the fastest pace in 40 years.

Lately, movements in the price of gold and silver have been dictated mostly by the relative value of the U.S. dollar along with rising Treasury yields.

Gold's decline for the month and quarter really has to do with the strength in the dollar, said Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund , adding that if you look at the U.S. dollar index for the last quarter, gold and currency have been moving inversely to each other.

For the third quarter, gold futures based on the most-active contract lost almost 8% lower, while the ICE U.S. Dollar Index has gained over 7%. The dollar index on Friday traded below its 20-year high of 114.78, reached on Wednesday.

The dollar has moved up because inflation is higher, and the Federal Reserve can raise interest rates higher than other developed countries in its attempts to tame inflation, making our currency more attractive, Teed, who's also director of research at Flexible Plan Investments, told MarketWatch.

The outlook for gold prices is difficult to gauge, he said, but there's "additional room" for further price declines as long as rates haven't topped out.

Teed emphasizes that he doesn't see gold starting to recover until inflation numbers come down to a point where the Fed can "take their foot off the brakes" and rates either "discontinue" moving up, or come down -- but that's many months off.

Once inflation sees a meaningful turnaround, then there wouldn't be much of a headwind for gold and that may be a good time to buy the metal, he said.

Read:Silver is outperforming gold this month, and that's just the start

Also see:Supply 'lag' helps lithium triple its prices in a year

-Myra P. Saefong


(END) Dow Jones Newswires

09-30-22 1410ET

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