Gold prices exhibited minimal movement on Thursday, lingering near six-month lows, as growing concerns about escalating U.S. interest rates continued to tilt investor sentiment in favor of the dollar. Simultaneously, surging Treasury yields added to the pressure on gold.
Both spot gold prices and gold futures dipped below the critical $1,900 per ounce level earlier this week, as a resurgent dollar and climbing Treasury yields displayed resilience. The greenback reached a 10-month high, while 10-year yields soared to their highest point in 16 years.
Sentiment took a further hit as oil prices surged to 2023 highs on Wednesday, prompting concerns that this could contribute to persistently higher inflation, potentially prolonging elevated interest rates. Apprehensions about a potential U.S. government shutdown also led investors to favor safe haven assets.
The dollar emerged as the primary beneficiary of the heightened demand for safe havens, particularly after the Federal Reserve signaled its intent to maintain higher interest rates for an extended period. Market expectations now reflect at least a 37% probability of a Fed rate hike in December, with rates poised to remain above 5% throughout 2024.
Spot gold saw a marginal decline of 0.1%, settling at $1,874.29 per ounce, while gold futures expiring in December remained steady at $1,890.95 per ounce as of 00:26 ET (04:26 GMT). Both these instruments traded at their lowest levels since mid-March.
Other precious metals also bore the brunt of the dollar’s strength, with silver futures experiencing nearly a 5% decline over the week, while platinum futures witnessed a 4% drop.
Gold on Track for Substantial September Losses
Gold prices are now on track to register a decline of over 3% for the month of September, marking their poorest monthly performance since February. The persistent increase in interest rates poses a significant challenge to the yellow metal, as it elevates the opportunity cost of holding non-yielding assets. This trend had adversely affected gold throughout 2022 and has continued to limit its gains this year.
Furthermore, gold faces limited prospects for recovery, given that U.S. interest rates are expected to remain above 5% at least until the end of 2024.
