Gold Dips as Dollar Strengthens Euro Hits 17-Month Low

Gold prices saw a slight decline on Tuesday, dropping 0.3% to $4,128.69 per ounce in spot transactions, while U.S. gold futures edged down to $4,156. The fall was driven by the strengthening dollar and higher U.S. Treasury yields, though losses were limited by reduced expectations of a Federal Reserve interest rate hike in October. Silver, platinum, and palladium also experienced declines, with silver falling 0.6% to $60.67 per ounce, platinum down 0.7% to $1,710.08, and palladium decreasing 0.2% to $1,170.15.

The dollar maintained its upward trend, pushing up the cost of precious metals for non-U.S. currency holders. The yields on 10-year and 30-year U.S. Treasury bonds hit their highest levels in 24 years, adding to the pressure on gold. Kyle Rodda, Senior Market Analyst at Capital.com, highlighted that geopolitical risks in the Middle East could serve as the next major catalyst for gold prices. He also noted that shifts in U.S. interest rate expectations and upcoming inflation data will be closely watched.

Expectations for a U.S. interest rate hike in October have diminished following weaker-than-expected job growth data, but traders still see an 87% chance of a hike in December. Rising interest rates would increase the opportunity cost of holding gold, which does not generate yield. Other data showed a slowdown in U.S. service sector activity, with supply chain pressures and high input costs suggesting inflation may persist through 2027.

The euro neared its lowest level in 17 months, falling to $1.1220 amid political uncertainty and financial concerns in the Eurozone. The dollar's strength was further supported by rising U.S. Treasury yields, with the dollar index stabilizing at 102.16 after reaching an 18-month high. Despite weaker U.S. job market data, investors expect the Federal Reserve to maintain a tight monetary policy for an extended period.