Gold futures experienced a significant slump, reaching their lowest point in over six months on Wednesday (Sept. 27), under the weight of a resurgent U.S. dollar. Notably, this decline led to a breach of the crucial support level at $1,900, largely attributed to technical selling pressure.
In this context, gold futures tumbled by $28.90, translating to a 1.51% decrease, ultimately closing at $1,890.90 per ounce. This closing figure marks the lowest gold prices have reached since March 10, 2023.
The negative sentiment extended to other precious metals as well:
- Silver declined by 47.20 cents, equaling a 2.03% drop, with a closing rate of $22.724 per ounce.
- Platinum futures experienced a $17.90 decrease, equating to a 1.96% decline, concluding at $896.30 per ounce.
- Palladium, on the other hand, only fell by $2, or 0.16%, with a closing rate of $1223.70 per ounce.
The resurgence of the U.S. dollar, evident in a 0.41% increase in the dollar index against six major currencies in the basket, had a considerable influence on these declines. The strengthening dollar led to a reduced attractiveness of gold contracts priced in dollars for traders holding other currencies.
Adding to the headwinds, the surge in U.S. government bond yields and the lingering expectation that the Federal Reserve (Fed) may prolong its commitment to maintaining high interest rates to combat inflation contributed to the pressure on gold prices.
Rupert Rowling, an analyst at Kinesis Money, highlighted that while gold had been bolstered by central banks worldwide diversifying their risk through gold purchases in recent months, the strengthening dollar and surging U.S. government bond yields have created a challenging environment for the precious metal. Nevertheless, Rowling anticipates a potential rebound in gold prices, driven by concerns over the property market crisis in China and the deceleration of the Chinese economy, factors that could motivate investors to seek refuge in gold as a safe-haven asset.
Investors will be closely monitoring the release of the U.S. Personal Consumption Expenditures (PCE) price index for August later this week. The PCE index holds particular significance as it is the Fed’s primary gauge of inflation, encompassing a broader range of goods and services than the Consumer Price Index (CPI). Additionally, investors are keenly attuned to the remarks of Fed Chairman Jerome Powell during an upcoming Town Hall meeting, with hopes of gaining valuable insights into the central bank’s future interest rate policies.
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Thursday, September 28, 2023