Gold prices experienced a slight dip on Tuesday, with the U.S. dollar and Treasury yields strengthening in anticipation of forthcoming economic data and Federal Reserve Chair Jerome Powell’s upcoming speech. These developments are expected to influence future interest rate decisions.
The spot gold price dropped by 0.1% to $1,916.88 per ounce as of 0703 GMT, while U.S. gold futures saw a 0.2% decline, resting at $1,930.00.
U.S. Treasury yields climbed to their highest levels in over a week, and the dollar gained ground. This rise in yields and the strengthening of the dollar rendered non-yielding gold more expensive for holders of other currencies, especially in anticipation of the release of U.S. retail sales and industrial production data later in the day.
Kyle Rodda, a financial market analyst at Capital.com, pointed out, “U.S. economic data remains very robust, and with upward pressure on yields persisting and markets only pricing in about a 10% chance of a Fed hike in November, an upside surprise that shows resilient U.S. households could weigh on gold.”
Markets are closely watching Jerome Powell’s speech scheduled for Thursday, as it is expected to provide further insight into the U.S. central bank’s stance on interest rates following dovish signals from top policymakers in recent weeks. An increase in interest rates would raise the opportunity cost of holding gold, which is a non-yielding asset.
In addition to economic factors, tension in the Middle East has been impacting gold prices. Recent geopolitical events led to gold prices reaching over three-week highs on Friday. Notably, U.S. President Joe Biden’s high-stakes visit to Israel on Wednesday, as the country prepares to escalate an offensive against Hamas militants, adds to the prevailing uncertainty in the market. Should there be a ground invasion by Israel into the Gaza Strip in the short term, it is expected to catalyze another increase in gold prices, according to Kyle Rodda.
Concurrently with the decline in gold prices, the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.8% decrease in its holdings on Monday.
Regarding other precious metals, spot silver saw a 0.3% decrease, settling at $22.53 per ounce, platinum lost 0.2% and stood at $889.06, while palladium experienced a 0.4% drop, reaching $1,138.92.
