Gold fell more than 2% to $2,329 an ounce and Silver declined 2.13% to $30.13 an ounce on the back of a stronger dollar and rising Treasury yields. This decline also comes after a period of significant gains in commodity prices, prompting some profit-taking by investors. The release of minutes from the recent FOMC meeting, which suggested that interest rates would stay elevated for an extended period, added to the downward pressure on gold prices. Despite this pullback, gold remains up approximately 14% year-to-date.
Key Market Movements and Economic Data:
- Dollar and Treasury Yields: The US dollar continued its upward trend for the fourth consecutive day, driven by higher Treasury yields. This response was influenced by a report indicating faster-than-expected economic expansion in the US along with rising price measures.
- Euro and Pound: The euro declined by 0.2% to 1.0806 against the dollar, initially cushioned by rising European bond yields. The pound also decreased by 0.2% to 1.2687 due to reduced long positions following disappointing US PMI data and a UK composite PMI that fell short of expectations.
Notable Economic Indicators:
- New Home Sales: In April, new home sales dropped by 4.7% to an annual rate of 634,000, falling short of the consensus estimate of 678,000. Regional performance varied, with sales in the Northeast plummeting by 20.9%, while the Midwest saw a 10% increase. The median sale price for April was $433,500.
- Weekly Jobless Claims: Initial jobless claims decreased to 215,000 from 223,000 the previous week, beating the consensus of 220,000. However, the 4-week moving average rose to 219,750.
- PMI Data: S&P Global's May flash composite PMI and services PMI both showed significant improvement compared to April. The manufacturing PMI also increased, indicating a broad-based improvement in economic activity.
- Mortgage Rates: Mortgage rates declined for the third consecutive week, with the 30-year rate dropping below 7% for the first time in over a month, averaging 6.94% as of May 23.
These developments reflect a complex interplay of economic factors influencing market sentiment and commodity prices. The continued strength of the dollar and rising Treasury yields, coupled with the Federal Reserve's stance on maintaining higher interest rates, are key factors contributing to the current market dynamics.