News

Gold prices are falling with the rise of the US dollar

  • 27 October, 2021
  • 2:18 pm EEST

Gold prices fell in trading on Wednesday, retreating from the key level of 1800 dollars.

The decline in the precious metal was supported by the rise in the US dollar and the rise in US bond yields, which reduced the attractiveness of bullion as a safe haven, ahead of the major meetings of a number of central banks.

Gold Prices Today

By 09:01 AM GMT (12:01 PM GMT), the gold futures contract for December delivery decreased by 0.29%, to record $1,788.20 an ounce.

The spot price for the yellow metal also fell by 0.28%, to $1,787.89 an ounce.

The precious metal rose to its highest level in a month late last week, but is down 1.2% from those levels.

At the same time, the price of silver futures contracts – for December delivery – decreased by 0.3%, to reach $24.02 an ounce.

The spot platinum price decreased by 1.28%, recording $ 1017.89 an ounce, and the spot palladium price decreased by 0.85%, to $ 1991.02 an ounce.

US Bonds

Yields on the benchmark 10-year US Treasury have soared, increasing the opportunity cost of zero-interest gold.

Short-term yields also rose with two-year yields briefly rising above 0.5%, a level last seen in March 2020.

The dollar also settled near a one-week high hit in the previous session, making gold less attractive to buyers holding other currencies.

Central Bank Moves

This comes at a time when investors in gold markets are awaiting the meetings of the Bank of Japan and the European Central Bank next Thursday.

The Bank of Japan plans to maintain its massive stimulus program on Thursday and cut inflation expectations for this year, signaling that it does not intend to follow other central banks looking to exit crisis-mode policies.

The FOMC is also scheduled to meet on 3 November, with assurances that it will announce the beginning of tapering, US yields and the dollar should start to rise.

Gold Markets

Geoffrey Haley, chief market analyst for Asia Pacific at Oanda, said that gold will struggle to hold close to $1,800 over this period.

“The ability to surprise the Federal Reserve is high,” he added, noting the possibility of an acceleration, or an acceleration of the pace of stimulus reduction, which could weigh on gold more.

Technically, spot gold looks neutral in a range of $1,783 to $1,795 an ounce, and a breakout could signal a trend, Reuters technical analyst Wang Tao told Reuters.

Gold is often considered a hedge against inflation, although lower stimulus and higher interest rates lead to higher government bond yields, resulting in a higher opportunity cost of holding bullion.

US consumer confidence unexpectedly rose in October as concerns about rising inflation were met with better prospects in the labor market, suggesting that economic growth is beginning to recover after the turbulent third quarter.

China’s net gold imports through Hong Kong also jumped nearly 60% in September, to a 5-month high, data from Hong Kong’s Department of Census and Statistics showed.

 

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