The ongoing decline in gold prices was fueled by investor worries about the likelihood of extended high interest rates.
Spot gold reached a six-month low, falling 0.8% to $1,850.44 per ounce, while U.S. gold futures settled 0.7% lower at $1,866.10. The ongoing decline in gold prices was fueled by investor worries about the likelihood of extended high interest rates, with the U.S. central bank adopting a more hawkish stance on monetary policy.
Monthly and Quarterly Declines
For the month of September, gold was on track to end with a 4.6% decrease, and for the quarter, it faced a 3.6% decline. These declines were largely influenced by the Federal Reserve’s shift towards higher interest rates.
Interest Rates’ Impact on Gold
David Meger, Director of Metals Trading at High Ridge Futures, emphasized the significant influence of interest rates on gold. When interest rates rise, the opportunity cost of holding gold increases because gold doesn’t yield interest and is priced in dollars.
Dollar Index and Treasury Yields Gain
Both the dollar index and 10-year Treasury yields were poised for quarterly gains, further pressuring gold prices.
Brief Uptick on Favorable Inflation Report
Gold briefly saw an uptick, rising by as much as 0.8% in response to a moderately favorable inflation report. In August, the core personal consumption expenditures (PCE) price index increased by 3.9% annually, while the headline index rose by 3.5% year-on-year.
Gold as a Hedge Against Economic Uncertainty
Ole Hansen, Head of Commodity Strategy at Saxo Bank, highlighted gold’s enduring appeal as a hedge against economic uncertainty, especially amidst the challenging outlook for the U.S. economy in the coming months.
Chinese Gold Market and Precious Metals
In the physical gold market, China saw a slight decrease in gold premiums during the week, but they remained elevated due to robust investor demand driven by concerns about a weakening yuan and ongoing economic uncertainties. Among other precious metals, spot silver witnessed a 1.7% decline, platinum recorded a 0.3% decrease, and palladium edged down by 2.1%.