Gold Dips to Two-Month Low on Stronger Dollar and Rising Treasury Yields
Gold prices extended their decline on Tuesday, hitting a two-month low as the metal faced pressure from a stronger US dollar and rising Treasury yields. The price of gold fell 0.9% to $4,104.15 an ounce, the lowest level since August 5, down from an opening level of $4,140.38 after reaching a high of $4,152.35. The drop marked the third consecutive day of losses for gold, as the US dollar and Treasury yields continued to climb.
The US Dollar Index rose 0.2% on Tuesday, extending its gains for a second straight session and trading near its 18-month high of 102.54. A stronger US dollar typically makes dollar-denominated gold less attractive to buyers holding other currencies. Investors are favoring the dollar due to strong expectations of a US interest rate hike in December, along with rising political risks in Europe and the Middle East.
The 10-year US Treasury yield rose 0.3% on Tuesday, extending its gains for a third consecutive session and approaching Monday’s 24-year high of 5.349%. This rise in yields is providing further support for the US dollar, which is weighing on gold prices.
Markets are awaiting the minutes of the Federal Reserve’s latest monetary policy meeting on Wednesday, which could provide important signals about the path of US interest rates. Currently, there is a 76% probability that the Federal Reserve will leave interest rates unchanged at its October meeting, while the likelihood of a 25-basis-point rate hike in December stands at 87%. Investors are closely monitoring further US economic data and comments from Federal Reserve officials to reassess these expectations.
Looking ahead, further strong US economic data and more hawkish monetary policy comments could strengthen expectations for another US interest rate hike before the end of the year. This would support further gains in the dollar and US Treasury yields, putting additional downward pressure on gold and other metals. Meanwhile, gold holdings at the SPDR Gold Trust increased by around 0.57 metric tons on Monday to a total of 1,056.27 metric tons.