In a response to elevated bond yields and growing economic apprehensions in China, gold prices experienced a decline on Tuesday. Market focus has now shifted to the forthcoming U.S. retail sales data, which is anticipated to provide insights into the impact of higher interest rates on consumer spending.
At 0801 GMT, spot gold recorded a 0.3% decrease to reach $1,902.90, hovering near its lowest point in the past 1-1/2 months, a level touched on the previous day. Meanwhile, U.S. gold futures also saw a decline of 0.5%, reaching $1,934.90.
According to Kelvin Wong, senior market analyst, Asia Pacific, at OANDA, the ongoing decline in gold prices has reached an over-sold condition, potentially increasing the likelihood of an upswing in short-covering risk.
The dollar’s surge towards its highest levels in over a month added to gold’s woes, particularly as it made the precious metal more expensive for international buyers. Additionally, U.S. 10-year Treasury yields reached a fresh peak not seen since November 2022. This rise in yields increases the opportunity cost of holding gold, which does not generate interest.
Market experts from NAB Commodities Research attributed the decline in gold prices to the strengthening U.S. dollar and rising Treasury yields. Investors were closely observing potential regulatory actions from Chinese authorities aimed at tackling mounting financial and property risks.
China’s central bank, in a surprising move, reduced key policy rates on Tuesday due to a slowdown in industrial output and retail sales growth, both of which fell below forecasts. Attention has now shifted to U.S. retail sales data scheduled for later in the day.
Analysts suggest that if the U.S. retail sales data surpasses expectations, it could exert further downward pressure on gold. This outcome would provide additional evidence of the resilience of the U.S. economy, potentially allowing the Federal Reserve to maintain higher interest rates for an extended period.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.4% decline in holdings, reaching their lowest point since January 2020.
In the broader metals market, spot silver experienced a 0.5% decrease, trading at $22.49 per ounce, while platinum saw a drop of 1.1% to $891.71. Palladium followed suit with a 1.5% slide to $1,250.92.