Why gold fell today? 06 September 2023: Gold prices extended losses on Wednesday to hit a one-week low, as U.S. Treasury yields and the dollar held near the previous session’s highs on expectations that interest rates will stay elevated for some time.
- MCX Gold Critical Forecast, 06 August 2023
- Oil price jump poses risk to global inflation outlook
- U.S. dollar holds near six-month highs
Spot gold slipped 0.2% to $1,915.40 per ounce by 0818 GMT, extending losses for a fifth session and hitting its lowest since Aug. 29. U.S. gold futures fell 0.2% to $1,948.10.
The U.S. dollar held near six-month peak hit on Tuesday, while 10-year bond yields were around more than one-week highs as markets weighed cues on interest rates.
Federal Reserve Governor Christopher Waller said the latest round of economic data was giving the U.S. central bank space to see if it needed to raise interest rates again.
“Fed’s guidance for policymaking to be on a meeting-by-meeting basis has kept bets of additional tightening in November/December alive,” said Yeap Jun Rong, a market strategist at IG.
Additionally, a jump in oil prices does not provide much reassurance for the global inflation outlook and further convinces investors of a high-for-longer rate view, he said, adding that the U.S. CPI data next week would determine the Fed’s rate outlook over the coming months.
Markets have currently priced in a 93% likelihood of a Fed pause in September, although there’s still nearly 40% chance of a rate hike in November or December, according to CME’s FedWatch tool.
Higher U.S. interest rates and Treasury yields raise the opportunity cost of holding gold, which does not earn any interest.
With gold’s 200-day moving average sitting around $1,915 an ounce, it could offer a level of support over the near-term, unless yields surge further, said Matt Simpson, a senior analyst at City Index.
