Gold News: Positive US Data Causes Commodities To Falter

Gold News

June gold futures trading on the COMEX slightly declined on Friday, May 22nd, and settled around $1,205, finding support at the $1,200 level. Prices declined after Federal Reserve Chair Janet Yellen indicated that the central bank was ready to raise interest rates for the first time in six years in 2015. This came after inflation rose for the third month in a row in April, indicating that the economy had bounced back from a slump earlier in the year.

gold news

The statements from Yellen had multiple effects on the price of gold. Usually, rising inflation would cause the price of gold to go up, but analysts believe that in this case, it will lead to higher interest rates. Higher interest rates will increase the opportunity cost of holding non-yielding bullion. The prospects of higher rates also increased the value of the dollar, which makes gold more expensive for holders of other currencies.

For oil, the recent rally in prices looks to be faltering, as the positive US economic data reversed a trend from the last two months. Oil prices have been trading sideways since Yellen spoke after the latest Fed meeting, and are facing some serious headwinds. These include growing OPEC supply with Saudi Arabia and Iraq reaching record levels of production and underappreciated risk of supply from Iran. OPEC is meeting next on June 5th, where it is expected they will maintain their current quota for supply.

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