Gold prices remained largely unchanged late in the North American trading session, poised to end the day just below $2,400 after reaching a daily high of $2,432. The rally of the non-yielding metal was tempered by increased risk-aversion and rising US Treasury bond yields, as investors shifted their focus towards US Treasuries.
Earlier, spot prices for gold climbed as US Treasury bond yields declined ahead of a five-year note auction. However, post-auction, the yield on the US 10-year Treasury note rose by two basis points to 4.274%, presenting a challenge for gold prices. Despite the US dollar’s overall weakness, losses were somewhat contained, with the US Dollar Index (DXY) edging down by 0.08% to 104.38.
Gold found support from a risk-off sentiment, which drove spot prices to a three-day peak. Traders had fully anticipated a 25-basis point rate cut by the Federal Reserve in its upcoming September meeting. The CME FedWatch Tool indicated a 100% probability of this quarter-point cut, while data from the Chicago Board of Trade (CBOT) suggested market participants expect 53 basis points of easing throughout 2024, as reflected in the December 2024 fed futures rate contract.
In terms of economic data, the US Goods Trade Balance for July reported a narrower deficit than forecasted. However, business activity, as indicated by the S&P Purchasing Managers Index (PMI) report, showed mixed results, with manufacturing contracting for the first time since December 2023.
Adding to the positive sentiment for precious metals, India’s decision to reduce import taxes from 15% to 6% provided a boost to gold prices.
Looking ahead, traders are preparing for Thursday’s release of the initial Gross Domestic Product (GDP) reading for Q2 2024 in the United States. This will be followed by the release of the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure (PCE) Price Index figures for June.
