Gold ends with a modest loss after second-biggest selloff of 2023

Gold futures ended with a modest loss on Wednesday, a day after the most-active contract suffered its second-biggest daily drop of 2023 following comments from Federal Reserve Chairman Jerome Powell suggesting bigger interest rate rises may be necessary to quell inflation.

Price action

Gold for April delivery
GC00,
+0.29%
GCJ23,
+0.29%
edged down by $1.40, or nearly 0.1%, to settle at $1,818.60 per ounce on Comex. Prices fell 1.9%, or $34.60, on Tuesday.
Silver for May
SI00,
+0.51%
SIK23,
+0.51%
declined by 5 cents, or 0.2%, to $20.151 per ounce.
Palladium for June delivery
PAM23,
+0.42%
lost $8.50, or 0.6%, to $1,332.10 per ounce, marking a second straight finish at the lowest since June 2019. Platinum for April delivery
PLJ23,
+0.10%
gained $4.30, or 0.5%, to $940.60 per ounce.
Copper for May delivery
HGK23,
-0.58%
gained 5 cents, or 1.3%, to $4.027 per pound.

Market drivers

Federal Reserve Chairman Jerome Powell sent stocks reeling, Treasury yields higher and gold prices plummeting on Tuesday when he said that the central bank might need to raise interest rates even higher than market participants had anticipated in response to the latest stronger-than-expected economic data.

Read: Powell leaves door open for faster pace of interest rate rises at March meeting

“We know that the Fed’s comments have brought life back to the dollar index and this is not so much of good news for the yellow metal,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.

Even so, “it seems like gold traders are taking things with a grain of salt,” Aslam said in market commentary. “This means that the economic data is the most important point for gold traders and weakness in the data could push the Fed to change its narrative on the monetary policy.”

On Wednesday, Powell told the House Financial Services panel that the central bank has not made any decision the size of a potential interest-rate hike when it meets later this month.

Meanwhile, data from ADP Wednesday showed U.S. private payrolls rose by 242,000 in February. Economists polled by The Wall Street Journal had forecast a gain of 205,000 private sector jobs. The government will release monthly data on U.S. employment on Friday. See the economic calendar.

For now, the yellow metal may have found support above the closely watched $1,800 per ounce level, a sign that the risk of economic data turning weaker is helping to buttress gold prices — along with purchases of the yellow metal by central banks.

“A key threshold for gold will be the $1,800 an ounce level it is closing in on. Such has been the strength of buying by central banks, particularly China and Turkey, over the last year or so that the support at these lower levels remains very strong,” said Rupert Rowling, a market analyst at Kinesis Money.

Gold also found support as the U.S. dollar and Treasury yields saw their rise stall overnight Wednesday.

The ICE U.S. Dollar Index
DXY,
-0.64%,
a gauge of the greenback’s strength against a basket of major currencies, was up less than 0.1% at 105.71, while the yield on the 10-year note
TMUBMUSD10Y,
3.705%
added 1.2 points at 3.984%.

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