Gold prices have temporarily halted their decline, showing a marginal uptick after breaching the significant support level of $1,900, a development that hadn’t occurred in a month and a half. This stabilization comes as U.S. Treasury yields saw a boost due to market expectations that the Federal Reserve has yet to conclude its rapid monetary tightening efforts.
As of 0752 GMT, spot gold managed a slight 0.1% increase, reaching $1,903.20 per ounce. Concurrently, U.S. gold futures remained steady at $1,935.40.
The recent fluctuation in gold’s value can be attributed to several factors, as highlighted by market strategist Yeap Jun Rong of IG. The persistent rise in real yields and the concurrent strength of the U.S. dollar have collectively tempered gold’s allure, fostering hesitancy among investors.
The sentiment towards gold has been mirrored by the holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust. This ETF has experienced consistent declines, reaching a nadir last observed in January 2020. Notably, there have been no reported inflows since late July.
Rong offered insight into the broader economic context, noting, “Recent U.S. economic data provides a backdrop for the sustenance of elevated interest rates. The latest retail sales data suggests that concerns of an impending recession are being counteracted, potentially curtailing the influx of safe-haven investments.”
The recent dip in gold prices to $1,895.50 an ounce coincided with benchmark 10-year U.S. Treasury yields surging to nearly a 10-month high. This upward trajectory makes Treasury yields a more attractive option than non-interest-bearing gold.
Despite the brief descent below the $1,900 level, reminiscent of a similar occurrence in June, gold appears to have found some support. Tim Waterer, Chief Market Analyst at KCM Trade, noted that buyers stepped in at this critical technical and psychological juncture.
Nonetheless, Waterer acknowledges that should the demand for the U.S. dollar persist and the $1,900 level be definitively breached, this might trigger a more significant downward movement in gold prices.
As market watchers await the release of minutes from the Federal Reserve’s July policy meeting, investors remain vigilant, keen to discern the upcoming rate strategy. Elsewhere in the precious metals arena, spot silver observed an 0.8% uptick to $22.68 per ounce, platinum gained 0.4% to $892.29, and palladium increased by 0.6% to $1,242.83.
