By Barani Krishnan
Investing.com — The dollar is stealing every bit of safe-haven shine out there, leaving gold — the original precious metal — with very little luster.
Gold’s benchmark futures contract on New York’s Comex, December, settled at $1,648.90 an ounce, down $28.10, or 1.7%, on the day, after a session low at $1,646.15. For the week, it lost just over $60, or 3.5%.
The spot price of bullion, which is more closely followed than futures by some traders, was at $1,645.24 by 14:00 ET (18:00 GMT), after a midday tumble to $1,640.71.
Investing.com data showed the weekly drop in gold was the metal’s worst since a near 4% drop during the week of early August.
Gold broke below key $1,650 support on Thursday before bulls in the space lucked out, as the dollar’s tumble on talk of peak-inflation in the U.S. helped the yellow metal recoup virtually all that it lost on the day.
Gold’s selling, however, resumed Friday as the Dollar Index rose for a seventh time in eight days. The index, which pits the dollar against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, reached a session high of 113.30. Technical charts indicated a very likely 120 high for the Dollar Index, said analysts.
Bond yields benchmarked to the 10-year Treasury note, meanwhile, rocketed to a 14-year high of 4.06%.
The dollar and yields have been chief beneficiaries of the Fed’s campaign against inflation as the central bank hiked interest rates by 300 basis points this year and looks set to add another 125 before the year-end.
The run-up in the two has been anathema to gold, which has struggled for months to reassert its safe-haven standing as funds flowed steadily to long-dollar and short-bond positions at the expense of the yellow metal.
“With inflation seemingly so stubborn, it may need to go further than markets previously anticipated,” said Craig Erlam, analyst at online trading platform OANDA. “That doesn't bode well for gold in the near term. Yesterday's lows around $1,640 could soon be tested once more, with the late-September lows the next test after that.”
Friday’s declines in gold came as data showed U.S. retail sales were flat in September and below expectations as inflation at near 40-year highs took a toll on consumer appetite — the most dynamic sector of the economy.
The zero percent growth in retail sales for last month was below a minimum 0.2% expected by economists and compared with the 0.4% reported by the Commerce Department for August.
For the year to September, retail sales were at 8.4% versus the 9.4% registered in the 12 months to August.
Retail sales are a major indicator of consumer spending, which accounts for 70% of U.S. gross domestic product.
The September numbers for retail sales came on the heels of Thursday’s reading of the U.S. Consumer Price Index (CPI), which showed a 0.4% growth for last month — double economists’ estimates and four times higher than the expansion in August. The annual CPI growth of 8.2% for September was also not too far from the 9.1% expansion seen during the year to June, which marked a four-decade high.
Taken together, the retail sales and CPI numbers suggested the Fed was still far behind in its fight against inflation.
The central bank has raised interest rates by 300 basis points since March to curb runaway price pressures and is likely to add another 125 basis points before the year-end. Economists expect further hikes in 2023, making any talk of “peak-inflation” irrelevant for now.
"Given the acceleration of core CPI prices, the Fed will remain resolved to increase rates by at least 125 bps before year end," Oxford Economics' Matthew Martin in a note. "Slowing global trade flows, higher rates, and waning domestic demand will continue to support lower import prices, barring any further unexpected shocks to supply chains.”
Economists have warned that the Fed could push the United States into a deep recession with the sharpest rate hikes in four decades, pointing to the high-flying housing sector and one-time ebullient stock market as the central bank’s potential victims.
Wall Street’s top 500 stocks indicator, S&P 500, is down almost 25% on the year while tech stocks barometer Nasdaq has plunged 33%.
U.S. mortgage rates, meanwhile, climbed to 6.7% two weeks ago, their highest levels in 15 years as Fed rate hikes caused borrowing costs for home loans to swell.
Related Articles
Gold Has Worst Week in 2 Months as U.S. Yields at 14-Year High
Oil Down 7% on Week as U.S. Inflation Simply Unyielding Â
Exclusive-Schlumberger faces employee backlash in Russia over cooperation on draft
Related Quotes
Being patient doesn't always pay off.
The Senior Citizen’s League says there ‘may be no COLA payable in 2024.'
Inflation and higher interest rates could be here to stay. BofA says changing demographics, deglobalization, and underinvestment in energy production have created a new “regime” for the global economy.
The economist warned in 2006 that the U.S. housing bust would cause a financial crisis. Now he has a new economic doomsday prediction, and it isn't pretty.
The U.S. stock market took an unusual swing after Thursday’s inflation report. “Shortly after the open, the S&P 500 index had dropped nearly 4% from its pre-market highs before staging an epic rally of over 5%,” Bespoke Investment Group said in a note Friday. “Even in this ‘all or nothing’ type of market environment, reversals of that magnitude are rare.”
MarketWatch Picks has highlighted these products and services because we think readers will find them useful; the MarketWatch News staff is not involved in creating this content. And at a 2009 shareholder meeting, Buffett noted that the first best thing you can do to protect against inflation is to invest in yourself and your skills: “If you’re the best teacher, if you’re the best surgeon, if you’re the best lawyer, you will get your share of the national economic pie regardless of the value of whatever the currency may be,” he said.
Investors seemingly can’t stop trying to pick a stock market bottom, no matter how bad the news—and it continues to backfire. Consider: This past Thursday, September’s consumer inflation report came in much hotter than expected, with the core CPI hitting a 40-year high. The initial response was exactly what you’d expect—the traded down as much as 2.4%—but then it started rallying…and rallying.
These diversified natural-resource giants have solid balance sheets, earnings, and dividends. All that they need is a rebound in commodity prices.
Investors have become more confident that the company can put the past behind it as demand for air travel recovers.
Everyone is hoping the market might be bottoming and by the recent actions of Bank of America clients, some evidently think the lows must be in sight. Last week, BofA customers splashed out $6.1 billion on US stocks, in what amounted to the third largest inflow since 2008. While the bank has stated it is not as confident the bottom is quite so close, it’s not hard to see why investors feel the time is right to lean into equities. The widespread losses have left scores of beaten-down stocks looki
Last month, the Federal Reserve implemented its fifth straight interest rate hike this year, and its third consecutive hike at 75 basis points, bringing its key funds rate up to the 3% to 3.25% range. The move showed that the central bank is deadly serious about taking on the stubbornly high inflation that has been plaguing the economy since the middle of 2021. The Fed’s turn toward an aggressive anti-inflationary policy may not be hard enough, however, as the September data, released this morni
In the midst of a bear market, with rising interest rates and the threat of a prolonged recession in the air, real estate investment trust (REIT) stocks have endured tremendous price declines. Given this, it isn’t easy to find REITs that could see dividend increases soon. Two questions come to mind. Why would a company raise its dividend when the yield is already increasing with each drop in price? And how do you find REITs with the dividend well-covered by funds from operations (FFO) and with s
Investors were surprised by the big rally in the stock market on Thursday, but Friday brought another dose of reality and disappointment. After having posted monumental gains despite high readings on inflation, the Nasdaq Composite (NASDAQINDEX: ^IXIC) closed at its worst level of the year, and the S&P 500 (SNPINDEX: ^GSPC) and Dow Jones Industrial Average (DJINDICES: ^DJI) gave up most of their advances from earlier in the week. One of the biggest stock stories of the past several years has been Tesla (NASDAQ: TSLA).
Yahoo Finance Live anchors discuss the dip in stock for Tesla amid CEO Elon Musk’s ongoing Twitter trial
This week’s worse-than-expected inflation report led to turmoil in more than one market, but you only read about one of them. What got far less attention was the flurry of excitement that the inflation report caused in the normally-staid I-bond market.
Things have been even worse for the technology stock-driven Nasdaq Composite (NASDAQINDEX: ^IXIC). Historically, every double-digit percentage decline in the major U.S. stock indexes, including the Nasdaq, has eventually been placed in the rearview mirror by a bull market rally. This makes every bear market a surefire buying opportunity for patient investors.
The US energy industry is largely comprised of private-sector firms with investors and shareholders. Saudi Arabia and Russia don't have that problem.
Making investments pay out for the long term is the true challenge in today’s market environment. The series of headwinds piling up – from persistently high inflation to rising interest rates to slowing demand to bureaucratic bloat – are rising to hurricane force, and renewing investors’ attention to defensive stocks. It’s only logical. The classic defensive stock, the dividend payer, ensures an income stream no matter how the markets move, and if the yield is high enough, these stocks can also
Whether you made or lost money on a stock is just part of evaluating a successful trade. The process matters too.
Ark Invest CEO Cathie Wood doesn't doubt that the U.S is in a recession.