International gold prices fell more than 1% during afternoon trading on May 28 (US Eastern Time), with August delivery gold futures on the Chicago Mercantile Exchange's COMEX division dropping $47.40 (1.16%) to $4,029.60 per troy ounce as of 2:37 PM. The decline occurred despite falling oil prices and US Treasury yields, as investors positioned for a potentially hawkish outcome from the ongoing Federal Open Market Committee meeting. The FOMC is scheduled to announce its interest rate decision on May 29, with market speculation including the possibility of a surprise rate hike amid dollar strength at July highs.
Gold Futures Drop 1.16% to $4,029.60 on COMEX
August gold futures (GCQ6) on COMEX traded at $4,029.60 per troy ounce as of 2:37 PM May 28 (US Eastern Time), down $47.40 from the previous settlement price of $4,077.00. The 1.16% decline pushed prices back toward testing support at the $4,000 level. Gold, which does not pay interest, typically becomes less attractive in high-interest-rate environments, making falling Treasury yields a normally supportive factor for prices.
Oil Prices Fall Over 4% as Treasury Yields Decline
International crude oil prices dropped sharply during the session. West Texas Intermediate (WTI) crude for September delivery fell more than 4%, breaking below the $80 per barrel level, while Brent crude declined 4.66%. The oil price decline eased inflation concerns, contributing to downward pressure on US Treasury yields. The 10-year Treasury yield fell nearly 5 basis points from the previous close.
FOMC Meeting Fuels Hawkish Expectations and Gold Selling
Despite the favorable yield environment, gold prices declined as the US dollar maintained its July peak levels and the FOMC meeting progressed. Market expectations lean heavily toward a hawkish stance from the committee, with some speculation of a surprise rate increase. Fed Chair Kevin Worsh's stated intention to reduce excessive market communication has increased uncertainty. David Meger, metals trading director at Highritz Futures, stated that "escalating energy prices remain an inflation concern for FOMC members" and that "expectations the Fed will tilt hawkish are strengthening rate hike bets, lifting the US dollar, and pressuring gold prices." Investors engaged in net selling of gold in anticipation of a hawkish outcome, with potential for increased downside volatility if the FOMC implements an unexpected rate hike.
FAQ
What happened to gold prices on May 28?
International gold prices fell more than 1% during afternoon trading on May 28 (US Eastern Time), with August delivery gold futures on COMEX dropping $47.40 (1.16%) to $4,029.60 per troy ounce as of 2:37 PM.
Why did gold prices decline despite falling oil prices and Treasury yields?
Gold declined as investors positioned for a potentially hawkish outcome from the ongoing FOMC meeting scheduled to announce its rate decision on May 29, with the US dollar maintaining July highs and market speculation including the possibility of a surprise rate hike.
