According to the World Gold Council report, the current stagnation in gold prices is temporary. Due to rising US bond yields and strong dollar, gold will remain under pressure and further downward trend may be seen in prices.
US dollar and bond yield pressure on gold
The World Gold Council says gold prices are entering a critical phase after a sluggish trading week. However, this pause could be a temporary relief amid a broader downward trend, as rising US real and bond yields, as well as a strengthening US dollar, continue to weigh on bullion.
According to the report, the yellow metal has seen a relatively quiet week, with the market consolidating its position above the June low of US$3,943/ounce. At the same time, US real yields have seen another sharp rise, with the 10-year US TIPS yield on track to surpass its 2025 high of 2.44 per cent, as markets raised expectations for the next Fed hike.
“A sustained break above that level would indicate that the main trend has shifted from sideways to upward, which we suspect will have a negative impact on equity markets and will also put pressure on gold,” it said.
Gold surged last week, with London Bullion Market Association (LBMA) gold post-meridiem (PM) rising 1.8 per cent weekly to US$4,067/oz, and recapturing the US$4,000/oz level — limiting its year-to-date decline to 6.9 per cent.
“Buying on dips supported gold as it remained above US$4,000/oz despite higher yields and a stronger dollar,” it said.
It noted, “From a technical perspective, last week’s bounce may be just a temporary respite in gold’s ongoing decline since January – with the next key technical support level at US$3,857-3,887/oz.”
At the time of writing the report, the yellow metal was trading at around US$4,048.98.
All eyes are on Fed’s decision
According to the World Gold Council, there are high expectations from the US Federal Reserve to keep interest rates unchanged this week. However, the report said any hawkish signals from the Federal Open Market Committee (FOMC) during Wednesday’s press conference, or any unexpected uptick in Thursday’s Personal Consumption Expenditures (PCE) inflation data, could put pressure on gold again by pushing up Treasury yields and strengthening the US dollar.
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