Gold resumes gains as US treasury yields decline

Economies.com
2023-12-05 08:55AM UTC

Gold prices rose in European trade on Tuesday, resuming gains and moving off recent record highs as US treasury yields lost ground.

 

Recent cautious remarks by Fed Chair Jerome Powell, and weak data in the US manufacturing sector boosted the odds for an interest rate cut in March 2024. 

 

Gold Prices Today

 

Gold prices rose 0.6% to $2,041 an ounce, with a session-low at $2,028, after losing 2% yesterday on profit-taking away from record highs at $2,146. 

 

Such strong gains came amid prospects of early interest rate cuts in the US, and strong demand on gold as safe haven amid growing geopolitical concerns in the Middle East. 

 

US Yields 

 

US 10-year treasury yields fell 0.6% on Tuesday, resuming losses and approaching three-month trough at 4.197%. 

 

Weaker US treasury yields underpin non-yielding assets such as gold. 

 

Such developments came following a batch of bearish remarks by Fed officials and soft data. 

 

Powell

 

Fed Chair Jerome Powell said on Friday that it's clear the monetary policy is slowing the economy down as expected, with interest rates reaching appropriate tightening levels, however he still opened the way for further policy tightening if needed

 

US Manufacturing Sector 

 

Powell's remarks came after data showed the US manufacturing sector remained soft in November, showing the impact of US policy tightening.

 

The ISM Institute showed the manufacturing PMI remained at 46.7 in November, the 13th month in a row of a result below 50, which separates contraction from growth.

 

US Rates

 

Odds for a US interest rate hike at the December Fed meeting fell to just 2.5%

 

Odds for an interest rate cut by the Fed in March surged to 64%, while odds for a cut in May surged to 90%.

 

The SPDR 

 

Gold holdings at the SPDR Gold Trust rose 2.3 tonnes yesterday to a total of 881.12 tonnes, the highest since November 22. 

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