Gold Prices Hover as Focus Turns to Jackson Hole for Rate Clues
Gold prices remained relatively stable around their five-month lows on Monday, under the influence of heightened bond yields. Markets eagerly await insights from the Federal Reserve’s Jackson Hole symposium, hoping for clues about the future trajectory of interest rates.
As of 1001 GMT, spot gold experienced marginal fluctuations, hovering at $1,887.70 per ounce, while U.S. gold futures registered a slight uptick of 0.1%, reaching $1,917.70.
Ole Hansen, Saxo Bank’s Head of Commodity Strategy, noted, “The market remains concerned about the outlook for rates in the U.S. and most clearly, the recent spike that we’ve seen in the bond yields to a cycle high.” This surge in bond yields has contributed to the current challenges faced by gold.
Hansen further explained, “The cost of holding a gold position right now is simply too high for longer-term investors to get involved.” The delicate balance between holding gold positions and managing potential risks in the current market landscape is a key consideration for investors.
Last week, gold touched its lowest point since mid-March, reaching $1,883.70, prompted by robust economic indicators that fueled expectations for sustained elevated U.S. interest rates. This, in turn, led to reduced demand for gold as a non-yielding asset.
With Treasury bond yields and home mortgage rates on the rise, there are indications that support for additional rate increases at the U.S. Federal Reserve could diminish. This prospect has been underscored by weakening inflation dynamics.
Market participants are now eagerly anticipating the speech of Fed Chair Jerome Powell on Friday, as central bankers from across the globe convene for their annual conference in Jackson Hole, Wyoming.
Kelvin Wong, Senior Market Analyst at OANDA, provided insights into the likely themes of discussion during the symposium. He highlighted that the discourse is likely to center around whether the current economic environment justifies a higher level of longer-term equilibrium interest rates compared to a decade ago.
Wong also posited, “If the longer-term equilibrium interest rate scenario is justified by an elevated sticky inflation environment, gold may now start to behave as a hedging instrument and attract inflows given that prices have dropped to attractive levels.”
In terms of exchange-traded funds, the SPDR Gold Trust reported a 0.3% increase in holdings on Friday, marking its first inflow in a month.
Among other precious metals, silver experienced a modest rise of 0.6%, reaching $22.85 per ounce, while platinum witnessed a minor decline of 0.5%, reaching $905.41. Palladium, however, saw a more substantial decline of 1.3%, reaching $1,239.91.
