Gold faced a notable downturn on Wednesday, marking its most substantial daily decline in two months as the U.S. dollar held steady at a ten-month high, and Treasury yields reached a fresh 16-year peak. This decline was further compounded by heightened market anticipation for key U.S. economic data that could potentially offer insights into the Federal Reserve’s future interest rate decisions.
At the time of reporting, spot gold exhibited resilience, hovering at $1,874.39 per ounce as of 0237 GMT. This comes after a 1.4% drop in value on Wednesday, its most significant daily loss since July. Meanwhile, U.S. gold futures remained stable at $1,891.10.
Market observers have attributed this decline in gold prices to recent economic data revealing that orders for long-lasting U.S. manufactured goods saw an increase in August, indicating that business spending on equipment may be regaining momentum.
Hugo Pascal, a precious metals trader at InProved, commented on the situation, stating, “Durable goods (figures) were higher than expected – that’s why the 10-year (Treasury yield) was higher, that’s why the dollar also moved higher, and that’s why we saw selling pressure for gold.”
The U.S. dollar’s value surged to a ten-month high against major currency peers, while Treasury yields climbed to a 16-year high. Investors are betting on the U.S. economy’s ability to outperform global counterparts amidst a high-interest rate environment.
Minneapolis Fed President Neel Kashkari weighed in on the situation, suggesting that it is not yet clear whether the U.S. central bank has concluded its interest rate hikes, citing ample evidence of sustained economic strength.
It’s essential to note that higher interest rates result in a higher opportunity cost for holding gold, which is priced in dollars and does not generate any interest income.
The focus of the financial markets has now shifted to two significant events: the revised U.S. GDP growth rate for the second quarter and the release of weekly jobless claims data later in the day. Additionally, the August personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, is expected to be released on Friday.
In parallel developments, the possibility of a fourth partial U.S. government shutdown in a decade has grown more significant as top congressional Republican Kevin McCarthy rejected a stopgap funding bill.
In the precious metals market, spot silver experienced a 0.3% decline, reaching $22.46 per ounce, potentially marking its fourth consecutive session of losses. Meanwhile, platinum edged up by 0.1%, reaching $888.08 per ounce, and palladium saw a similar 0.1% increase, reaching $1,222.30 per ounce.
