Prices of gold and silver tumbled to their lowest levels in three weeks on Friday following a hotter-than-expected reading on May inflation numbers.
Price action
- Gold futures expiring in August GCQ22, -0.45% shed $22, or 1.2%, to $1,830 per ounce, the weakest level for the most actively traded gold contracts since May 19, according to FactSet data.
- Silver futures for delivery in July SIN22, -0.74% were off 54 cents, or 1.7%, to $21.29 per ounce, the lowest level since May 16.
- Platinum futures for delivery in July PLN22, -1.31% were down $20.30, or 0.7%, to $954 per ounce, extending its decline this week to nearly 6%.
- Palladium prices PA00, -0.45% for July delivery were down $22, or 1.2%, to $1,906.
What analysts are saying
While gold has traditionally been seen as an inflation hedge, signs of accelerating price pressures have become anathema to the yellow metal because they prompt investors to price in expectations of higher interest rates from the Federal Reserve. This makes the dollar and Treasury bonds more attractive by comparison, according to Naeem Aslam, chief market analyst at AvaTrade.
“The price action has become even more intriguing, and this is because on one hand, gold acts an inflation hedge, but at the same time, the main denominator is the dollar index. Higher inflation means more hawkish monetary policy by the Fed and this is the focus among precious metal traders,” Aslam said.
According to the CPI data, the cost of living in the U.S. climbed 1% in May on the back of higher rents, gas and food prices, keeping the rate of U.S. inflation at its highest level in more than 40 years. The headline reading came in at 8.6% annualized, topping the previous cycle high seen in March.
See also: U.S. didn’t get any relief from high inflation in May – CPI to show another big gain