Gold Prices Decline as Dollar and Treasury Yields Rise
Gold prices reached a five-month low on Thursday as the dollar and treasury yields gained momentum. This follows recent upbeat economic data that has strengthened expectations of the Federal Reserve’s commitment to policy tightening. Spot gold held steady at $1,893 per ounce, having dropped to its weakest level since March 15 at $1,888.30. Meanwhile, US gold futures declined by 0.3% to $1,922.60.
The minutes from the Fed’s July meeting revealed that most policymakers continue to prioritize the battle against inflation, while some participants expressed concerns about the risks of pushing rates too far and their impact on the economy.
The surge in benchmark 10-year US treasury yields to a 10-month high has boosted the dollar to its highest level since mid-June. Consequently, investors have been drawn away from non-interest-bearing assets like gold. However, there are signs of potential stability for spot gold prices today, as noted by Matt Simpson, Senior Analyst at City Index. He believes that the US dollar and yields are approaching key swing highs, which could indicate a potential inflection point.
According to Reuters technical analyst Wang Tao, spot gold may further drop to $1,879 per ounce as it has broken two crucial support levels. NAB Commodities Research noted that upward movement in gold prices will likely depend on the delivery of expected rate cuts in 2024.
Solid US economic data, defying expectations of a recession, has reduced investors’ appetite for gold as a safe haven during times of economic turmoil. This has contributed to the decline in gold prices. In contrast, spot silver rose by 0.3% to $22.46 per ounce, while platinum gained 0.3% to $885.15 after touching its lowest levels since October. Palladium also saw a slight increase of 0.4% to $1,213.94.
In conclusion, gold prices have dropped significantly as the dollar and treasury yields continue to rise. The market remains cautious about the future of gold, closely monitoring US rates and economic data. Investors are eagerly awaiting rate cuts in 2024, which could potentially drive a rebound in gold prices. However, the current outlook remains uncertain, and the market is expected to exhibit volatility in response to changing economic conditions.
