Intraday Gains Push Gold Prices Near Four-Week High as US 10-Year Treasury Yields Decline
In the European trading session on Thursday, gold prices witnessed a notable uptick, extending their rally for the fourth consecutive day and nearly reaching a four-week peak. This surge was primarily attributed to a decline in US 10-year treasury yields, which contributed to an improved investment environment for the precious metal.
The recent release of lackluster US economic data has cast uncertainty on the likelihood of another US interest rate hike in November. As a result, market participants are now anticipating the upcoming release of crucial US consumer spending data, a key determinant in shaping future market sentiment.
Gold Prices Show Resilience
During the trading session, the price of gold advanced by 0.3%, reaching $1,947 per ounce. Although the intraday low briefly touched $1,942 per ounce, this ascent marked a continuation of the metal’s upward trajectory. The previous session had witnessed a 0.25% gain, resulting in a three-day streak of profit accumulation and culminating in a four-week pinnacle of $1,949 per ounce. The resilience of gold prices was underscored by the simultaneous weakening of the US dollar and diminishing US yields.
Declining US Treasury Yields Bolster Gold’s Appeal
The US 10-year treasury yields underwent a decline of 0.5% on Thursday, extending the trend of losses for the fourth consecutive session. This downward movement nearly pushed the yields to a three-week low of 4.087%. The dwindling yields played a significant role in enhancing the allure of non-yielding assets like gold.
Sluggish US Economic Data Puts Pressure on Federal Reserve
The recent influx of underwhelming economic data from the United States has raised concerns about the pace of economic recovery. Notably, the private sector added significantly fewer jobs than anticipated in the past month. These developments have fostered expectations that the Federal Reserve might reconsider the ongoing cycle of policy tightening.
Shift in Rate Hike Probabilities
Following the release of the disappointing economic data, the probabilities of a 0.25% interest rate hike by the Federal Reserve in September experienced a decline from 13.5% to 11.5%. Furthermore, the odds of a similar rate hike in November also saw a decrease, falling to 44%. The revised probabilities underscore the evolving sentiment regarding the central bank’s future policy actions.
Focus on Upcoming Consumer Spending Data
Market attention is now directed towards the impending release of US consumer spending data for July. This data holds significance for the Federal Reserve as it uses it as a gauge for assessing inflation trends. Given the current economic landscape, the central bank’s outlook remains contingent on the trajectory of growth and labor conditions.
Investor Interest Reflects in Gold Holdings
Investor interest in gold manifested itself through notable activity in the SPDR Gold Trust. The gold holdings in the trust increased by 0.87 tonnes in the previous session, culminating in a total of 890.10 tonnes. This figure marked the highest level since August 18, underscoring the continued demand for the precious metal.
As gold prices remain influenced by shifting economic indicators and central bank decisions, investors and analysts are closely monitoring these developments to glean insights into the precious metal’s future trajectory. The intricate interplay between declining US yields, lackluster economic data, and investor sentiment continues to shape the dynamics of the gold market.
