As the dollar index reached a three-week high and 10-year U.S. Treasury yields rose, spot gold experienced a 0.7% decline to $1,951.19 per ounce, and U.S. gold futures dropped 1.1% to $1,950.30 by 1239 GMT.
The shift in market sentiment was attributed to the increasing likelihood of a “soft landing” for the U.S. economy and signals from Chinese authorities about deploying substantial stimulus measures. According to ActivTrades senior analyst Ricardo Evangelista, this wave of optimism is causing a dip in safe-haven assets like gold.
U.S. banks reported tighter credit standards and weaker loan demand during the second quarter, as shown by Federal Reserve survey data. Additionally, recent data revealed slowing inflation and robust economic growth.
Despite China’s efforts to restore and expand consumption in sectors such as automobiles, real estate, and services, analysts believe such measures could also drive up demand for physical gold in the country, which is the world’s top consumer of the precious metal.
In July, zero-yield gold experienced its most significant monthly increase in four months, fueled by central banks signaling an end to their rate-hiking cycles.
Tim Waterer, chief market analyst at KCM Trade, noted that while inflation is declining, central banks remain data-dependent to ensure a smooth disinflation process.
Traders are awaiting the release of the Institute for Supply Management’s manufacturing PMI for July and the U.S. Job Openings and Labor Turnover Survey (JOLTS) report for June, both scheduled for 1400 GMT.
Other precious metals also saw declines, with silver slipping 1.5% to $24.39 per ounce, platinum falling 2% to $929.93, and palladium dropping 2.4% to $1,251.67.
The fluctuations in gold prices reflect the ongoing uncertainties in the global economy, driven by factors such as central bank policies, inflation, and economic growth prospects. Market participants remain vigilant for any further developments that could impact the precious metal’s performance in the coming days.