Gold prices surged over $2,400 an ounce in early trading on Friday, hitting successive, never-before-contemplated highs in the wake of the very dovish statements from the European Central Bank and its head, Christine Lagarde, about a potential June rate cut.
However, they quickly reversed course and retreated back under the $2,400 level after traders realized that higher US bond yields and a stronger US dollar could be significant negatives for commodities priced in US dollars.
The rising tensions in the Middle East also bolstered gold prices, with investors seeking safe havens over the weekend, particularly after Iran launched drone attacks on Israel. However, this support wasn’t sufficient to counter the rush into US Treasuries and the greenback, resulting in gold closing with small losses for the day.
This decline occurred even as the yield on US 10-year Treasuries retreated to around 4.53%, down four points for the day. The surging US dollar rose approximately 0.7% for the session and more than 1.5% for the week. Consequently, the Aussie dollar slid back under 65 US cents, closing the week down 0.9% for the day and more than one and a half per cent for the week.
Contributing to the downward pressure on prices were comments from two Fed members on Thursday and Friday, who emphasized that there was no urgent need for a rate cut from the US central bank.
Spot gold ended at $2,343.60 per ounce after reaching a record high of $2,400 earlier in the session. Comex gold futures peaked at $2,448.80 before rapidly retreating to $2,360.20, down 0.53% on the day but up 0.47% for the week. Meanwhile, the World Gold Council reported that the Aussie dollar price traded around $A3,687 per ounce before retreating to finish the week at $US3,626 per ounce.
Weak US producer prices also played a role, particularly as certain parts of the data directly fed into the Fed's preferred inflation measure, pointing to a low reading when the March figures are released in about a fortnight.
"One thing that is definitely driving this gold buying spree from central banks is the wars happening around the globe; historically, this has always happened as gold is a safe haven," commented ACY Securities analyst Luca Santos.
"We anticipate gold prices to rise in the next two months. From a technical perspective, this rally is a result of gold prices breaking out of a record 42-month consolidation period. It's like a coiled spring being let loose now," remarked Vincent Tie, sales manager at dealer Silver Bullion.
Spot silver rose 1% to $28.75 per ounce, reaching its highest levels since February 2021, but then retraced to end at $27.97, down 1% on the day but still up 1.3% for the week.
"As with past precious metal price rallies, silver will outperform gold once it breaks out. We are already seeing customers aware of this behavior positioning themselves in silver in recent months," noted Tie. Platinum rose 0.7% to $986.65, and palladium edged 0.1% higher to $1,049.83.
Copper continued to perform well, jumping back above $4.31 a pound to be up 1.5% for the day and 1.8% for the week. Copper prices touched a 16-month high of $4.36 a pound in trading but then retreated. The metal performed strongly after China’s imports of copper held up in March, though this was largely due to the sharp fall in imports of copper and copper concentrates in March 2023.
