Gold prices drop as US dollar strengthens and yields surge
Gold prices have been under pressure this week, falling to $4,120 on Tuesday morning from a high of $4,692 in August. This decline is driven by a stronger US dollar and rising Treasury yields, which have surged to their highest levels since 2002. The 10-year yield reached 5.32%, while the 2-year yield hit 4.831%. These higher yields make non-yielding assets like gold less attractive, contributing to its downward trend.
The US Dollar Index (DXY) has also been rising, reaching 102.53 on Monday, despite weak nonfarm payrolls and softer inflation data. The next key event for gold will be the Federal Reserve minutes, expected on Wednesday, which could provide insights into future monetary policy. A dovish signal could reverse the current trends, but the outlook remains uncertain.
Technically, gold's price action shows a series of lower highs and higher lows, with the Supertrend indicator in the red and the price below the 50-day EMA. However, a falling wedge pattern suggests a potential rebound, though a breakout above the wedge's upper trendline would be needed to confirm a bullish reversal.
Meanwhile, the SPDR Gold ETF (GLD) has seen limited demand, attracting just $1.31 billion in assets over the past 30 days, compared to $2 billion for the iShares Bitcoin Trust (IBIT). The macroeconomic environment, including rising US government debt and elevated Treasury yields, continues to weigh on gold's performance.