On Thursday, gold prices remained close to the lowest point in three weeks. This was influenced by a higher-than-anticipated rise in U.S. private payrolls during July, which led to increased speculation about further monetary policy tightening. This, in turn, strengthened the dollar and caused bond yields to rise.
Spot gold, trading near its lowest level since July 12 from the previous session, remained relatively steady at $1,935.20 per ounce by 0100 GMT. Concurrently, U.S. gold futures experienced a slight decline of 0.2%, reaching $1,970.90.
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On Wednesday, the U.S. dollar index (DXY) reached a 4-week high, while benchmark 10-year Treasury yields reached their highest point since November. This followed the release of data indicating that U.S. private payrolls had grown by 324,000 jobs in the previous month, surpassing Reuters' forecast of a 189,000 increase.
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Despite the market's relatively indifferent response to Fitch's U.S. credit rating downgrade on Wednesday, investors expressed anticipation of persistent concerns regarding the nation's debt situation, political divisions, and the international status of the U.S. dollar in the long run.
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According to FX strategists surveyed by Reuters, the U.S. dollar is projected to maintain its position against the majority of major currencies in the next three months. This forecast is attributed to the strength of the domestic economy, which is reinforcing the anticipation of prolonged higher interest rates.
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Gold is frequently pursued as a secure investment during periods marked by financial and economic uncertainty, yet its appeal tends to wane when interest rates increase due to its lack of yield.
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Thursday's upcoming decision by the Bank of England to elevate interest rates to a level not seen in 15 years is widely anticipated. However, there remains a possibility of a recurrence of June's unexpected half-point hike, given that inflation continues to surpass that of other leading global economies.
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Nornickel, the leading global producer of palladium based in Russia, announced that Asia has now emerged as the company's primary revenue market, a first in its history.
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On Thursday, the value of gold stayed under the $1,940 per ounce mark, maintaining its proximity to three-week lows due to the influence of a robust dollar. The indication that the U.S. economy continues to display strength in response to increased interest rates reinforces the Federal Reserve's argument for maintaining a restrictive monetary policy.
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Gold under pressure as strong US data bolsters dollar, bond yields
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Gold shows a slight increase in Asia's morning trade, reversing the previous night's declines in what could be seen as a potential technical rebound. The focal point is the surge in Treasury yields and a stronger dollar, which follows a U.S. credit downgrade from Fitch and better-than-anticipated jobs data. Daniel Dubrovsky, a contributing senior strategist at Daily FX, notes that gold often functions as an anti-fiat instrument, exhibiting an inverse correlation to a blend of the US Dollar and Treasury yields. He points out that the outlook for the precious metal appears bearish due to an intriguing shift among retail traders who have grown more bullish, a trend highlighted by the contrarian IG Client Sentiment gauge. This, he adds, serves as a cautionary signal indicating the potential for upcoming losses. Spot gold experiences a 0.2% increase, reaching $1,937.62 per ounce.