Gold declines to two-week trough as US yields power up
Gold prices fell in European trade for the second session, plumbing a two-week trough and almost testing the support of $1,900 as the dollar spikes.
Another surge in US treasury yields also hurt gold prices as analysts expect the Fed to raise interest rates once more this year.
The Federal Reserve also officially expects to hold interest rates high for most of 2024 and 2025 to control inflation.
Gold Prices
Gold prices fell 0.3% to $1,909 an ounce, the lowest since September 14, with a session-high at $1,916, after losing 0.5% on Monday, the fourth loss in five days as the dollar strengthens.
The Dollar
The dollar index rose 0.25% on Tuesday, extending gains for the third session in a row while hitting a 10-month high at 106.20 against a basket of major rivals.
A stronger dollar makes dollar-denominated gold futures costlier to holders of other currencies.
US Treasury Yields
US 10-year treasury yields rose 0.6% on Tuesday, extending gains for the second straight session and scaling a 16-year high at 4.564%.
Such gains came after the Federal Reserve issues official expectations that clearly pave the way for another interest rate hike this year.
The Fed also expects two interest rate cuts in 2024, much lower than previously expected.
Fed Remarks
Several Fed officials hinted last Friday at several more interest rate hikes, and said the battle with inflation isn't over yet.
US Rates
Current pricing for a 0.25% interest rate hike in November stands at 20%, which is still rather low.
However, pricing for a 0.25% Fed interest rate hike stands at a higher 40%.
Now investors await important US personal spending data to measure inflation and judge the likely path ahead for US policies.
The SPDR
Gold holdings at the SPDR Gold Trust fell 0.87 tonnes yesterday, the second drop to a total of 876.52 tonnes, the lowest since January 2020.
Euro sharpens decline to six-month trough amid concerns about rate gap
Euro fell in European trade on Tuesday on track for the sixth straight loss against dollar, plumbing a six-month trough amid concerns of a widening interest rate gap in favor of the US.
The ECB announced that interest rates have reached restrictive levels, while the Federal Reserve hinted at another interest rate hike this year.
EUR/USD fell 0.2% today to 1.0570, the lowest since March, with a session-high at 1.0596, after losing 0.5% on Monday, the fifth loss in a row after ECB President Christine Lagarde's testimony ahead of Parliament, while US treasury yields spiked.
Lagarde said that recent economic indicators show weakness in the euro zone in the economy during the third quarter of the year.
Lagarde said that inflation in the euro zone is expected to decline further but will likely remain high for a long time.
Lagarde asserted that current interest rates will help achieve inflation targets in the medium term at 2%, with the ECB continuing to rely on new data to determine the path ahead.
Interest Rate Gap
The current interest gap is now holding at 100 basis points between the US and Europe, the lowest since May 2022, however it could rise once more to 125 basis points.
Most analysts expect the European Central Bank to hold interest rates unchanged this year.
However, the Fed is expected to raise interest rates by 25 basis points in November or December to hammer inflation home.
The Dollar
The dollar index rose 0.25% on Tuesday, the third profit in a row, hitting a ten-month high at 106.20 against a basket of major rivals.
US 10-year treasury yields rose 0.6% today to 16-year peak at 4.564%.
Such gains came after the Federal Reserve issues official expectations that clearly pave the way for another interest rate hike this year.
The Fed also expects two interest rate cuts in 2024, much lower than previously expected.
Gold declines as dollar gains ground, while US treasury yields spike
Gold prices fell on Monday as the dollar gained ground against most major rivals while US treasury yields gained ground.
Wall Street was highly pressured this month as the Fed continues to hint at extended policy tightening, and amid concerns about the health of the economy.
Such pressures coincide with higher US treasury yields, while oil prices surge as well above $95 a barrel for the first time since last year.
Investors now await important US consumer spending data, important for gauging inflation.
Otherwise, the dollar index rose 0.4% as of 20:59 GMT to 105.9, with a session-high at 106.1, and a low at 105.5.
Gold spot prices fell 0.6% as of 21:00 GMT, or $11 to $1,934.8 an ounce.
Wall Street heads higher despite pressure from bond yields
Most US stock indices rose on Monday despite pressure from higher US treasury yields following recent policy statements from the Federal Reserve.
Wall Street was highly pressured this month as the Fed continues to hint at extended policy tightening, and amid concerns about the health of the economy.
Such pressures coincide with higher US treasury yields, while oil prices surge as well above $95 a barrel for the first time since last year.
Investors now await important US consumer spending data, important for gauging inflation.
Since the start of September, the S&P 500 fell over 4%, while NASDAQ shed 5.9%, as Dow Jones fell 2.2%
Today, Dow Jones is down 0.1% to 33,944, while S&P 500 rose 0.2% to 4,330, as NASDAQ gained 0.4% to 13,258.