Gold remains stable during the early hours of the Asian session, and there's a chance of a technical recovery as a response to the eight consecutive days of price decline observed on Wednesday, with prices reaching their lowest point since July 6. Some experts believe that the potential for Chinese purchasing could also provide support to the precious metal. Notably, the leading traders in Shanghai have elevated their net long positions in gold, marking the highest figures since the summer of 2020, according to a research document by Daniel Ghali, a senior commodity strategist at TD Securities. Presently, spot gold shows minimal movement, holding at $1,892.66 per ounce.
On Thursday, gold prices reached their lowest point in five months, driven by the increasing strength of the U.S. dollar and rising Treasury yields. This surge followed positive economic data, further reinforcing the belief that the Federal Reserve would continue its course of policy tightening.
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At 0141 GMT, spot gold, trading at $1,891.70 per ounce, displayed a subdued demeanor, marking its lowest point since March 15. Simultaneously, U.S. gold futures recorded a 0.3% decline, settling at $1,921.80.
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The minutes from the Federal Reserve's July meeting revealed that "the majority" of policymakers maintained their emphasis on combating inflation, while "certain participants" highlighted potential risks to the economy associated with excessive rate hikes.
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Reaching a peak not witnessed in 10 months, the benchmark 10-year U.S. Treasury yields propelled the dollar to its most elevated position since mid-June. This move diverted investors' attention from non-interest-bearing gold assets.
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Since around mid-July, gold prices have been in decline, coinciding with the strengthening of the US dollar. As inflation levels have stabilized and the Federal Reserve is anticipated to uphold elevated interest rates, real yields have consistently risen (depicted in the accompanying graph). The recently released minutes from the FOMC meeting reaffirmed a hawkish inclination, with certain Fed members not ruling out potential future rate hikes if deemed necessary. In the present day, US Treasury yields have once again inched upwards, solidifying the prevailing sentiment of a prolonged period of elevated rates.
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