Gold steady on US Labor Day holiday

Gold traded with low volatility on Monday, fluctuating around the $1,940 per ounce level. If gold prices increase, resistance may be encountered near $1,953 per ounce, while if gold prices decline, support may be found near $1,885 per ounce.

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar dipped on Monday, with the dollar index dropping to 104.1. US Treasury yields remained the same as Monday was a Bank Holiday in the US, with the US 10-year bond yielding 4.18%. US markets were slow on Monday due to the Labor Day holiday and the dollar traded with low volatility.

Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. The U.S. Federal Reserve raised interest rates by 25 basis points in July to a target range of 5.25% to 5.50%, the highest level in 22 years. 

Federal Reserve Chair Jerome Powell, recently speaking at the Jackson Hole Symposium in the US, warned that the Fed is prepared to raise interest rates further to bring inflation down. Most investors are anticipating a pause in rate hikes, but the US central bank has signaled that further tightening is possible if inflation does not go down consistently. 

The Fed’s aggressively hawkish policy over the past year has been paying off and inflationary pressures in the US are easing. Cooling US inflation rates have shifted market expectations towards a less hawkish direction. Markets now see the Fed peak rate approaching, boosting gold prices.

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Written by:
Myrsini Giannouli

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