TLDR:
- Gold prices edged higher, lifted by retreating Treasury yields
- Traders await more US economic data for clues on Fed policy
- Market pricing shows 90% chance of 25bps rate cut in November
- Geopolitical tensions providing some support for gold
- Analysts see potential downside risks, forecasting $2,600/oz by year-end
Gold prices edged higher on Tuesday, supported by a retreat in Treasury yields as investors await key US economic data that could provide insights into the Federal Reserve’s monetary policy path.
Spot gold rose 0.5-0.6% to around $2,660-$2,665 per ounce, while US gold futures settled 0.5% higher at $2,678.9.
The modest gains in gold prices came as benchmark 10-year Treasury yields slipped following soft manufacturing data from New York State. Lower yields make non-interest-bearing gold more attractive to investors. The US dollar also weakened slightly but remained near two-month highs, providing some support for dollar-denominated gold.
Market participants are closely watching for upcoming US economic releases, including retail sales, industrial production data, and weekly jobless claims. These reports could offer clues about the strength of the economy and influence expectations for Federal Reserve policy moves.
Currently, traders see about a 90% chance of a 25-basis-point interest rate cut in November, according to CME FedWatch tool. The Federal Reserve’s policy decisions have a significant impact on gold prices, as lower interest rates reduce the opportunity cost of holding the precious metal.
David Meger, director of metals trading at High Ridge Futures, commented on the market dynamics:
“We’re seeing a little pullback in yields as bond prices rally here. That’s offering a little stability, a little support to the gold market.”
He added that gold may be entering a period of consolidation, with a potential for a “sideways to higher uptrend” if yields continue to retreat and the dollar pulls back.
While geopolitical tensions in the Middle East have provided some support for gold as a safe-haven asset, analysts at Commerzbank noted that risks could decrease if Israel refrains from targeting Iran’s oil and nuclear sites in an expected retaliatory strike.
The bank sees “slight downside risks for the gold price” and expects it to reach $2,600 per ounce by the end of the year.
The precious metal has been trading near record highs in recent weeks, buoyed by expectations of eventual interest rate cuts and ongoing geopolitical uncertainties. However, the pace of gains has slowed as markets reassess the timeline for potential Fed easing.
In other precious metals, silver rose 1-1.3% to around $31.50-$31.60 per ounce, while platinum fell 0.5-0.7% to about $986-$988. Palladium experienced a more significant decline, dropping 1.6% to around $1,013 per ounce.
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