Gold Futures Settle Sharply Lower As Dollar Rebounds

Gold prices fell sharply on Friday as the dollar recovered from recent losses amid rate hike bets

The dollar surged higher after a Federal Reserve official warned that the central bank needs to continue hiking rates to tame inflation.

CME Group’s Fedwatch tool indicates the Fed will raise the federal fund rate by 25 basis points in May, with rate cuts seen in the back half of the year to boost consumer spending and growth.

It appears the European Central Bank is also moving towards a smaller 25-bps rate hike in May.

The dollar index, which dropped to 100.79 in the Asian session, rallied to 101.75 about an hour past noon, and was at 101.65 a little while ago, gaining about 0.63%.

Gold futures for June ended lower by $39.50 or about 1.9% at $2,015.80 an ounce.

Silver futures for May ended down $0.465 at $25.460 an ounce, while Copper futures for May settled at $4.1065 per pound, down $0.0175 from the previous close.

A report from the University of Michigan showed one-year inflation expectations jumped to 4.6% in April from 3.6% in March. At the same time, five-year inflation expectations held at 2.9% for fifth straight month and have stayed within the narrow 2.9 to 3.1% range for 20 of the last 21 months.

Traders also digested a slew of other U.S. economic data, including a report from the Commerce Department showing retail sales fell by much more than expected in the month of March.

The Commerce Department said retail sales slumped by 1% in March after dipping by a revised 0.2% in February. Economists had expected retail sales to decline by 0.4%, matching the decrease originally reported for the previous month.

A separate report from the Federal Reserve showed U.S. industrial production increased by more than expected in March, although the increase was largely due to a spike in utilities output.

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