Commodity newsGold Prices Dip Amidst Stronger U.S. Dollar and Treasury Yields
Gold prices have shown a downward trend in today’s trading, Tuesday, in response to the strengthening of the U.S. dollar and rising Treasury yields. Investors are eagerly awaiting the preferred inflation report of the Federal Reserve for more signals on whether the Federal Reserve will raise interest rates again this year.
Current Gold and Dollar Status: Gold futures dropped by 0.3% to $1,930 per ounce, while spot gold fell by 0.2% to $1,912 per ounce. On the other hand, the U.S. dollar index rose by 0.12% to 105.812 points.
Gold’s Performance at the Previous Close: Gold prices declined during Monday’s trading session, influenced by a stronger dollar and the 10-year U.S. Treasury yields reaching their highest level since October 2007. At the close of trading, December futures for gold decreased by 0.45%, equivalent to $9, settling at $1,936.6 per ounce.
Impact of the Strong Dollar: The U.S. dollar reached its highest level in 10 months, while the benchmark 10-year U.S. Treasury yields continued to rise to a 16-year high. These factors have had a dampening effect on non-yielding gold, which is priced in dollars.
Expectations published on Wednesday showed that the majority of policymakers at the Federal Reserve expect another increase in interest rates in the next three months. However, investors are pricing in only a 50% chance of further monetary tightening in 2023.
European Central Bank’s Stance: The President of the European Central Bank stated that the bank’s future decisions would ensure that key interest rates remain sufficiently low for an extended period, given local price pressures.
ANZ analysts commented, “While we believe the U.S. dollar’s rally will continue until the end of the year, stronger expectations for interest rate cuts and slowing economic growth will likely see the dollar weaken again next year.”
Potential Support for Gold: The temporary halt to Federal Reserve interest rate hikes could provide some support for gold. However, investors are also closely monitoring the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation, set to be released on September 29.
According to Reuters technical analyst Wang Tao, spot gold may break support at $1,913 per ounce, heading toward the range of $1,901 to $1,908 per ounce.
Meanwhile, the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), reported a 0.1% decline in its holdings on Monday, reaching its lowest level since January 2020.
Performance of Other Metals:
- Spot silver declined by 0.6% to $22.97 per ounce.
- Platinum fell by 0.5% to $906.12.
- Palladium dropped by 0.3% to $1,225.41.
ANZ analysts remarked, “Silver faces a double blow: expectations of higher U.S. interest rates, which reduce its investment appeal, and weakness in the Chinese economy affecting industrial demand.”
In conclusion, gold prices are facing headwinds due to the strong U.S. dollar and rising Treasury yields, with investors closely monitoring economic indicators and Federal Reserve decisions for potential shifts in the precious metal’s performance.
