In Asian trading on Wednesday, gold prices showed limited movement as they faced pressure from the recent strength in the dollar and Treasury yields. The precious metal remained in a holding pattern as market participants eagerly awaited further indications of U.S. monetary policy from various Federal Reserve officials scheduled to speak this week.
Key Highlights:
Gold’s Recent Struggles: Despite a robust recovery from five-month lows over the past fortnight, gold has encountered difficulties in making significant gains lately. The primary factors weighing on gold include the renewed strength of the dollar and elevated Treasury yields.
Dollar Near Six-Month High: The U.S. dollar continued to trade near a six-month high during Wednesday’s session. Concurrently, 10-year Treasury yields remained close to their highest levels in over two decades.
Expectations of Prolonged High Rates: Market consensus anticipates that U.S. interest rates will remain elevated for an extended period this year. This expectation has diminished the prospect of substantial gains in gold, as higher rates increase the opportunity cost of investing in the yellow metal.
Lower Recession Odds: The reduced likelihood of a U.S. recession this year has also placed downward pressure on gold. Typically, gold benefits from a risk-off environment, but improved economic prospects have dampened its appeal.
Steady Gold Prices: In early trading, spot gold held steady at $1,926.70 per ounce, while gold futures for December delivery dipped 0.1% to $1,951.65 per ounce by 00:27 ET (04:27 GMT).
Focus on Fed Speakers: Market participants are currently looking for more signals regarding U.S. monetary policy from several Federal Reserve officials scheduled to speak this week. Dallas Fed President Lorie Logan will be among the first to speak on Wednesday, followed by Chicago Fed President Austan Goolsbee and Fed open market committee members John Williams and Michelle Bowman on Thursday.
Fed’s Hawkish Rhetoric: Despite expectations of the central bank keeping rates unchanged during its two-day meeting on September 19 and 20, the Fed is expected to maintain its hawkish rhetoric. This stance is influenced by sticky inflation and a robust labor market, factors that are likely to weigh on gold and other metals for the remainder of the year.
Copper’s Mild Decline: Among industrial metals, copper prices experienced a slight decline on Wednesday, with market attention focused on further economic cues from major importer China. Copper futures fell 0.1% to $3.8317 per pound.
China’s Trade Figures: China is poised to release its trade data on Thursday, with analysts anticipating smaller declines in both imports and exports. Nevertheless, the primary focus will be on the country’s commodity imports for August, given that local economic activity and the property market have shown limited signs of recovery.
Mixed Economic Indicators: Earlier this week, data revealed that China’s service sector recorded its slowest growth in eight months in August. While a previous reading indicated some resilience in the manufacturing sector, overall business activity continues to face challenges.
