The gold market witnessed a significant tumble on Thursday (August 17), with gold futures dipping below the $1,920 threshold. This decline marked the ninth consecutive day of negative movement for gold, setting a record not witnessed since March 2017. The market’s downward trajectory can be attributed to the mounting pressure from soaring US Treasury yields, reaching their highest point in 15 years.
In the wake of these developments, gold futures experienced a drop of $13.10, representing a decline of 0.68%, culminating at $1,915.20 per ounce. However, in contrast, silver futures managed to record an 18-cent uptick, amounting to a 0.80% increase, and concluding at $22.715 per ounce. Similarly, platinum futures observed a rise of $4.30 (0.48%), ending at $895.60 per ounce, while palladium futures also climbed by $8.10 (0.7%), reaching a closing value of $1,220.50 per ounce.
The driving force behind this decline is the resolute surge in the 10-year U.S. Treasury yield, which catapulted to 4.31%. This pinnacle marks the highest level attained in 15 years, dating back to 2008. The correlation between this surge in Treasury yields and the declining performance of gold is rooted in the augmented cost of holding gold, an asset that does not accrue interest.
This upswing in US bond yields was spurred by the release of the Federal Reserve (Fed)’s meeting minutes from July 25-26. These minutes conveyed the Fed’s concern regarding persistently elevated inflation figures that surpass the targeted 2% level. As a result, the Fed is poised to adopt a more rigorous monetary policy in the subsequent periods.
Amidst this financial landscape, the US Department of Labor shared data indicating a decline of 11,000 in first-time applications for unemployment benefits, settling at 239,000 on a seasonally adjusted basis. This figure came in below analysts’ projection of 240,000, underscoring the tightness of the US labor market. This observation may potentially influence the Fed’s decision to uphold higher interest rates for an extended duration.
As gold grapples with these multifaceted dynamics, the financial sphere remains in a state of flux, meticulously attuned to the delicate balance between interest rates, inflation pressures, and market sentiment. The confluence of these factors will undoubtedly continue to define the trajectory of gold and its market dynamics in the foreseeable future.
The Spot Market is Open
Friday, August 18, 2023