Gold futures extended their decline for the seventh consecutive day on Tuesday, August 15, reaching their lowest closing level in over a month. The continued surge in US Treasury yields and the strength of the dollar remained persistent factors that put pressure on the precious metal markets.
Gold futures experienced a drop of $8.80, equivalent to 0.45%, settling at $1,935.20 per ounce. This marks the lowest closing price since July 10. Concurrently, silver futures displayed a decline of 5.20 cents, or 0.23%, ending at $22.656 per ounce. Meanwhile, platinum futures recorded a fall of $14.60, or 1.61%, closing at $892.20 per ounce. Palladium futures also faced a setback, sliding by $34.30, or 2.7%, reaching $1,238.60 per ounce.
The dollar’s performance against a basket of six major currencies, as indicated by the dollar index, held notable sway over these market movements. The 10-year Treasury yield, reaching 4.274% overnight, achieved its highest level since October 2022. These dynamics, in combination, have created a challenging environment for gold prices.
Alex Kupseikenevich, an analyst at FxPro, highlighted the persistently strong dollar as a key factor in driving down gold prices. The dollar index has now surged to its 200-day average, which serves as a significant measure of long-term trends. Should the dollar index maintain a trajectory above 103.2, Kupseikenevich anticipates potential further increases to a range of 105.3 – 107.5 in the coming months.
The robust dollar adds to the cost of gold contracts, which are priced in dollars, for investors using other currencies. Additionally, the uptick in US Treasury yields elevates the opportunity cost of holding gold, given that gold does not generate interest in the form of yield.
The strength of the dollar and the surge in bond yields can be attributed to reports of higher-than-expected US retail sales, a development that could influence the US Federal Reserve (Fed) to maintain higher interest rates for an extended period. In July, retail sales climbed by 3.17% on a yearly basis, exceeding analysts’ expectations of a 1.50% rise. On a monthly basis, retail sales rose by 0.7%, surpassing predictions of a 0.4% increase. Notably, the boost was driven by online sales during Amazon Prime Day.
As the interplay of economic indicators, central bank policies, and market sentiment continue to shape the landscape, the trajectory of gold and other precious metals will remain subjects of interest for investors and analysts alike.
In conclusion, gold’s recent decline, exacerbated by surging bond yields and the dollar’s strength, reflects the intricate interplay of global economic factors. As the US retail sales report and other market dynamics influence central bank decisions and investor behavior, the precious metals market remains sensitive to evolving trends that will impact its future direction.
The Spot Market is open
Wednesday, August 16, 2023