Gold prices saw a slight increase on Tuesday, rebounding from a seven-week low reached in the previous session. This recovery was attributed to the stabilization of US Treasury yields, which had surged to a 19-year high on Monday. The price of gold rose by up to 0.6%, surpassing $4,140 per ounce, after a 4% decline in the previous session. The spot gold price also increased by 0.6% to $4,140.21 per ounce.
The silver price also saw a modest increase, rising by 0.2% to $60.79 per ounce, after a 6% decline in the previous session. Meanwhile, platinum prices decreased, and palladium prices saw a slight increase. The Bloomberg Dollar Index remained stable after rising 0.3% in the previous session to its highest level since July 29. Market participants are closely watching the US economic data, including the personal consumption expenditures report due on Wednesday and the non-farm payrolls report on Friday.
The stabilization of US Treasury yields came after a sharp sell-off in the previous month, which was triggered by the conflict between the US and Iran. The US administration attempted to calm the market by increasing the purchase of long-term bonds, but yields continued to rise. Gold prices have been under pressure due to the expected interest rate hike by the Federal Reserve to combat inflation.
The current expectation is that the Federal Reserve will raise interest rates in October, with a probability of around 70%. This has led to a decline in gold prices, which have lost 7% so far in September. Despite reaching a record high of $4,510 per ounce earlier in the month, gold prices have been impacted by rising energy prices and the expected interest rate hike.
Charu Chanana, a senior investment strategist at Saxo Markets in Singapore, noted that gold prices have lost a crucial support level of around $4,230. If yields continue to rise, the $4,000 level, which was a support in June and July, will be the next psychological and technical test. Market participants are awaiting the US economic data to gauge the future path of interest rates.
The rise in energy prices has added to the pressure on the Federal Reserve to raise interest rates, which is a challenge for gold prices as it does not generate returns. The ongoing conflict in the Middle East has also raised concerns about the supply of oil, leading to an increase in oil prices. This has further complicated the outlook for gold prices.
In the short term, gold prices are expected to remain under pressure due to the expected interest rate hike and rising yields. However, some analysts believe that gold prices could recover if the US economic data shows signs of slowing down, which could lead to a pause in the interest rate hike cycle. For now, market participants are advised to keep a close eye on the US economic data and the developments in the Middle East.
Key points
- Gold prices rose on Tuesday as US Treasury yields stabilized
- The Federal Reserve is expected to raise interest rates in October, with a probability of around 70%
- Gold prices have lost 7% so far in September due to rising yields and energy prices
