Gold prices experienced minimal movement, with June witnessing significant losses due to robust U.S. economic data that heightened risk appetite and sparked concerns about potential interest rate hikes by the Federal Reserve. The precious metal plummeted to its lowest point in three months following a series of hawkish indications from Fed officials, particularly Chair Jerome Powell, who emphasized the possibility of multiple rate hikes later this year. Additionally, an upward revision of U.S. gross domestic product figures indicated greater resilience in the world's largest economy, diminishing gold's appeal as a safe haven asset. These developments further raised apprehension that the Fed would have sufficient economic flexibility to continue raising rates, which in turn exerted additional downward pressure on gold. Spot gold remained steady at $1,908.01 per ounce, while gold futures declined by 0.1% to $1,915.95 per ounce. Throughout June, both contracts recorded respective losses of 2.7% and 3.3%.
Analysts noted that the yellow metal was approaching a sustained decline below the critical support level of $1,900, an occurrence that could potentially trigger technical selling. The anticipation of rising interest rates unfavourably affects gold, as it increases the relative cost of purchasing the precious metal compared to the dollar and government debt. This notion adversely impacted gold throughout 2022 and has continued to exert downward pressure on the metal in 2023. In addition to the Federal Reserve, the hawkish signals emanating from the European Central Bank and the Bank of England also contributed to the decline in gold prices this week, particularly due to persistently high inflation in these two countries.
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