Gold prices edged slightly higher on Thursday, attempting to recover from a recent six-month low reached in the previous session. The precious metal faced headwinds primarily driven by an elevated U.S. dollar and rising Treasury yields. Investors, meanwhile, eagerly awaited forthcoming U.S. economic data to gain insights into the Federal Reserve’s interest rate trajectory.
As of 0738 GMT, spot gold showed a marginal uptick of 0.1%, reaching $1,876.80 per ounce, following a substantial 1.4% drop on Wednesday, marking its most significant daily decline since July. In parallel, U.S. gold futures also rose by 0.2% to $1,894.10 per ounce.
The recent pressure on gold prices can be attributed to the release of data on Wednesday, revealing an increase in orders for durable U.S. manufactured goods in August. Additionally, business spending on equipment appeared to regain momentum, contributing to the surge in Treasury yields and the strengthening of the U.S. dollar.
Hugo Pascal, a precious metals trader at InProved, explained, “Durable goods (figures) were higher than expected – that’s why the 10-year (Treasury yield) was higher, that’s why the dollar also moved higher, and that’s why we saw selling pressure for gold.”
The U.S. dollar reached a 10-month high against major currencies, while Treasury yields reached a fresh 16-year peak, driven by investor expectations that the U.S. economy would outperform its global counterparts in a high-interest-rate environment.
Minneapolis Fed President Neel Kashkari added to the uncertainty on Wednesday by stating that it remains unclear whether the U.S. central bank has concluded its rate-hiking cycle, despite ample evidence of ongoing economic strength. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold, which is priced in dollars.
Market attention has now shifted to the imminent release of crucial U.S. economic data, including the revised second-quarter GDP growth rate and weekly jobless claims. Moreover, the August personal consumption expenditures (PCE) price index, which serves as the Federal Reserve’s preferred gauge of inflation, is scheduled for release on Friday.
In the midst of these economic developments, political tensions emerged as well, with top congressional Republican Kevin McCarthy’s rejection of a stopgap funding bill on Wednesday. This move brought the prospect of the fourth partial U.S. government shutdown in a decade closer to reality.
In the broader precious metals market, spot silver experienced a modest gain of 0.2%, reaching $22.55 per ounce, while platinum rose by 0.3% to $890.10 per ounce. Palladium also recorded a 0.4% gain, reaching $1,226.99 per ounce.
Gold’s performance in the coming days will depend significantly on the outcome of the upcoming economic data releases and the evolving geopolitical situation in the United States. Investors will continue to closely monitor these factors as they assess the near-term prospects for the precious metal.