On Tuesday, gold prices dipped to a one-week low as bond yields surged, and the U.S. dollar strengthened, with investors seeking a hedge against global economic growth concerns.
Key Points:
Gold’s Decline: Spot gold was down 0.6% at $1,926.21 per ounce by 2:33 p.m. EDT (1833 GMT), while U.S. gold futures settled 0.7% lower at $1,952.60.
Dollar and Yields Surge: The safe-haven U.S. dollar reached multi-month highs against a basket of currencies due to concerns about global growth, particularly in China and the eurozone. This surge in the dollar made gold more expensive for overseas buyers.
Market Commentary: Edward Moya, senior market analyst at OANDA, noted, “Global bond yields are up sharply across the board, and it appears that there are concerns that global growth concerns could get even uglier, and that’s sending everyone back to the dollar.” He added that the global growth slowdown story might eventually benefit gold, but that would only occur once the market becomes more skeptical about U.S. recession risks.
Rate Expectations: Gold’s downside was limited by traders’ expectations of a 95% chance that the Federal Reserve would keep interest rates unchanged at its upcoming September 19-20 policy meeting. There was also about a 60% chance that rates would remain at current levels for the remainder of the year, as per CME Group’s FedWatch Tool. Non-yielding gold typically loses appeal when rates rise.
Fed Officials’ Comments: Investors were closely monitoring comments from Fed officials. Fed Governor Christopher Waller stated in an interview that the latest round of economic data allowed the central bank to assess whether further rate hikes were necessary.
Technical Outlook: Lukman Otunuga, a senior research analyst at FXTM, highlighted, “In the meantime, the precious metal is showing signs of exhaustion on the daily charts, with weakness below the 50-day SMA (simple moving average), opening a path back toward $1,920.”
Silver’s Decline: Silver experienced a notable decline, shedding 1.8% to $23.53 per ounce, marking its most substantial daily drop in a month.
Platinum and Palladium: Platinum dipped by 2.6% to $929.54, while palladium eased 0.6% to $1,214.45.
The movement in precious metals was primarily driven by concerns over global economic growth and the interplay between the U.S. dollar, bond yields, and interest rate expectations.
