Gold prices have experienced their lowest point in over two weeks on Wednesday, driven down by rising US Treasury yields and a stronger dollar that made the metal pricier for international customers, as reported by The Economic Times. On COMEX, gold futures were down 0.98% at $4,353.10 an ounce, after touching an intraday low of $4,350.10 an ounce, showing continued weakness from previous sessions. Silver futures fell 1.80% to $64.19 an ounce and hit a low of $64.15 an ounce, showing significant weakness across the precious metals complex. In the domestic market, gold of 99.9% purity fell ₹2,700 on Tuesday (September 1) to ₹1.58 lakh per 10 grams, according to local traders, marking the fifth consecutive session of decline. Gold has now fallen ₹8,900, or about 5.3%, from ₹1.67 lakh per 10 grams on August 25, while silver also declined ₹5,000 on Tuesday to ₹2.40 lakh per kg. The precious metal's three-day decline is on pace for the longest losing streak since early July, according to NDTV Profit.
Federal Reserve Governor Michael Barr has signaled the central bank's readiness to increase interest rates if inflation does not cool quickly, according to The Economic Times. Barr's comments add weight to Fed Chair Kevin Warsh's vow to fight inflation at the Jackson Hole Symposium on August 28, which triggered the current selloff in gold. Markets are also reassessing the Fed's interest-rate outlook, with traders pricing in a 67% probability of a 25-basis-point rate hike at the Fed's September 16 meeting, up from 39.6% a week earlier, according to CME FedWatch data cited in the market report. Barr warned that price pressures are at risk of becoming entrenched after being above target for more than five years, as reported by NDTV Profit. Ryan McKay, senior commodity strategist at TD Securities, noted that gold's weakness "is a follow-through from Warsh's Jackson Hole speech and comments from Barr this morning on inflation."
The US Treasury bond yields are sending the clearest signal that interest rates are likely to remain higher for some time, creating significant pressure on gold prices. US 10-year Treasury yields were around 4.80%, while the dollar index remained near a two-week high of 99.67, according to CNBC TV18. Gold typically comes under pressure when bond yields and the US dollar rise, as unlike interest-bearing assets, gold does not generate regular income, making it relatively less attractive when yields increase. The Bloomberg Dollar Spot Index was 0.2% higher, adding to the headwinds facing non-yielding gold. Higher US Treasury yields increase the opportunity cost of holding non-yielding assets such as gold, thereby weighing on investor demand for bullion. The renewed selloff in global bonds has added additional pressure on bullion prices.
The U.S. launched a barrage of airstrikes on Iran on Tuesday, prompting Iranian retaliation in the most serious escalation in weeks in the conflict that has driven up global energy prices, according to The Economic Times. Iran retaliated with attacks on the UAE and Jordan, raising fears of ongoing disruptions to energy shipments in the region. Renewed hostilities in the Middle East sent oil prices higher, with Brent crude rising 0.7% to $95.34 a barrel, as reported by CNBC TV18. Higher oil prices have revived concerns about inflation, which could make it harder for the US Federal Reserve to ease monetary policy. Crude oil prices have experienced a dramatic surge amid escalating Middle East tensions, with Brent crude futures rising around 0.5% to trade close to $96 a barrel, while WTI crude futures gained more than 1% to $91.23 a barrel, as reported by ET Now. Higher energy costs have raised inflation concerns, supporting the likelihood of a near-term Federal Reserve rate increase, which is generally unfavorable for bullion.
The ADP employment report is due later in the day and the more crucial nonfarm payrolls data is due on Friday for fresh clues on economic policy, as reported by The Economic Times. Markets are watching manufacturing and services activity data this week, followed by the August non-farm payrolls report on Friday (September 4), according to CNBC TV18. Stronger-than-expected economic data could reinforce expectations of higher-for-longer interest rates and keep pressure on bullion. For gold investors, the direction of the US dollar, Treasury yields, crude oil prices and expectations for Fed policy are likely to remain key drivers of bullion prices in the near term, according to ET Now. For Indian investors, the rupee-dollar movement will also matter, as a weaker rupee can cushion the impact of falling international gold prices on domestic prices, while a stronger rupee can amplify the decline. Kotak estimates support for Spot Gold at $4,329.7, with resistance at $4,409.5, followed by $4,434.2 and $4,514, while MCX gold faces support at ₹1,51,383, ₹1,50,651 and ₹1,48,282, with resistance at ₹1,53,753, ₹1,54,485 and ₹1,56,854.
