Gold futures post their first weekly loss since May

By Myra P. Saefong

Gold and silver futures settle lower for the week

Gold futures ended slightly higher on Friday, but prices posted a loss for the week a day after tapping their lowest intraday level since May.

Investors continued to digest a decision by the Federal Reserve announced Wednesday afternoon to leave its benchmark interest rate unchanged, while senior officials indicated another two rate hikes are on the table for this year.

Price Action

Market drivers

Gold prices had finished a bit higher on Thursday after the most-active futures contract dipped to as low as $1,936.10 an ounce, the lowest intraday level since late May.

Prices for the metal have been "chopping sideways" for the last four weeks and this week's price movement produced some of the same "'confused trading,' largely due to the Fed's latest plan to hike rates two more times this year," Adam Koos, president at Libertas Wealth Management Group, told MarketWatch. "Investors are puzzled, as inflation and employment have both stabilized."

Still, "two more hikes would certainly create a headwind for gold over the course of the coming weeks," he said.

On Friday, Federal Reserve Governor Christopher Waller said the fallout from several bank failures in the spring is likely to continue to play a role in the central bank's decision on how much to raise interest rates.

Also see:5 key takeaways from Fed Chair Jerome Powell's press conference Wednesday

Taking a look at the bigger picture, Koos said it's "crucial to understand that gold is both an inflation hedge, as well as a hedge against a struggling economy."

Read:Commodity market performance so far this year points to an economic recession, but a rise for industrial metals

The central bank "pausing hikes this month is a signal that not only are we close to a point where [Fed Chairman Jerome Powell] is ready to allow rates to marinate for a while, but it also means that he's seeing economic reports as more concerning," Koos said. "I think this is a 'neutral' for gold."

Following the Fed's decision, the U.S. dollar has weakened against most major currencies this week, with the ICE U.S. Dollar index trading 1.2% lower for the week, though up 0.2% in Friday dealings, at 102.29.

A stronger dollar can pressure prices for dollar-denominated gold prices, while a weaker dollar can support gold prices. Koos believes a weaker dollar will help gold in the long term.

-Myra P. Saefong

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06-16-23 1404ET

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