Gold prices experienced a decline on Tuesday as the U.S. dollar and bond yields maintained their strength in anticipation of forthcoming speeches by Federal Reserve officials. Despite a strong rally over the past two weeks, gold has faced challenges in recent sessions, with the dollar and yields remaining resilient, even amid signs of a cooling U.S. economy.
Key Points:
Gold’s Struggle: Despite a robust rally in the past fortnight, gold has encountered difficulties in making substantial gains recently. This is particularly noteworthy given the resilience of the dollar and bond yields, despite indications of a slowdown in the U.S. economy.
Expectations of Prolonged High Rates: The market’s anticipation that the Federal Reserve will maintain higher interest rates for an extended period has limited investor appetite for gold. Recent labor and inflation indicators have reinforced the view that the central bank needs to maintain a restrictive policy in the near term.
Gold Futures: The most-active December contract for gold futures on New York’s Comex settled down $14.50, or 0.7%, at $1,952.60 an ounce.
Spot Gold: Spot gold was down $11.20, or 0.6%, reaching $1,927.15 an ounce by 15:30 ET (19:30 GMT).
Focus on Fed Speakers: Market attention is currently centered on a series of speeches by Federal Reserve officials scheduled for this week. These speeches are expected to provide further insights into monetary policy ahead of an interest rate decision later this month.
Upcoming Fed Speakers: On Wednesday, Dallas Fed President Lorie Logan is set to speak, followed by Chicago Fed President Austan Goolsbee on Thursday. Additionally, Fed open market committee members John Williams and Michelle Bowman are scheduled to speak on Thursday.
Fed’s Likely Stance: Despite a series of weak economic readings, there is hope that the Federal Reserve may have limited room to continue raising interest rates. However, the central bank is still expected to maintain higher rates for an extended period, given recent indications of persistent inflation and a stable labor market.
Impact of Higher Rates: The prospect of higher interest rates tends to weigh on gold prices, as they increase the opportunity cost of holding the precious metal.
Safe-Haven Appeal: Gold’s safe-haven appeal has been diminished due to the likelihood of a soft landing for the U.S. economy this year. Nevertheless, concerns over a slowdown in the Chinese and euro zone economies have provided some support.
Copper Prices: Copper prices remained flat on Tuesday, also influenced by a stable dollar. China’s service sector grew less than expected in August, offsetting optimism from earlier manufacturing sector data. New York-traded copper futures settled down 0.35 cents at $3.8485 per pound.
China’s Economic Signals: Concerns over slowing growth in China, the world’s largest copper importer, have impacted copper prices this year. Observers are closely watching key trade data from China this week to gauge its appetite for copper imports.
Stimulus Measures: Investors have grown somewhat impatient with Beijing’s conservative approach to releasing additional stimulus measures despite economic challenges.
