Gold’s Recent Challenges:
Gold came close to testing the $1,900 support level for the second consecutive day but managed to stay above this threshold as buyers stepped in to support the precious metal.
The Dollar Index reached a one-week high, surpassing the 105 level, which contributed to pressure on gold. The dollar’s rise was triggered by higher-than-expected U.S. producer prices and retail sales data for August.
This week has been challenging for gold due to a series of better-than-expected U.S. inflation data, starting with the Consumer Price Index reading for last month, which indicated a year-on-year growth of 3.7% versus the forecasted 3.6%.
The dollar’s strength was further bolstered by the European Central Bank’s rate hike on Thursday, which increased expectations that the Federal Reserve might follow suit with its own rate hike, possibly in November or December.
The spot price of gold reached a low of $1,901.01 an ounce in the latest session after trading as high as $1,930.90 an ounce earlier in the week. By late afternoon in New York on Thursday, spot gold was at $1,908.
Gold’s most-active futures contract on New York’s Comex, December, settled at $1,932.50 an ounce, down only $2.60, or 0.05%, for the day.
Gold’s Outlook:
Analysts noted that gold is approaching the August lows, but its ability to hold above $1,900 could depend on the movement of Treasury yields. As long as Treasury yields do not experience a significant upward surge, the $1,900 level may provide support for gold.
Treasury Yields and Gold:
U.S. 10-year Treasury yields, which play a crucial role in influencing gold prices, reached 4.30 on Thursday. However, they remained below the multi-year high of 4.366 recorded in August.
Gold’s performance is closely linked to various economic and geopolitical factors, with Treasury yields and the strength of the U.S. dollar being particularly significant drivers of its price movements.
