Gold edges higher on weakening treasury yields

Gold prices remained steady on Wednesday, after Monday’s volatile session, and gold prices traded around the $2,030 per ounce level. Gold prices skyrocketed to an all-time high of $2,137 per ounce at Monday’s opening, but suffered a correction later in the day, plummeting to $2,025 per ounce. If gold prices increase, resistance may be encountered near $2,137 per ounce, while if gold prices decline, support may be found near $2,005 per ounce. 

Gold prices surged in early trading on Monday as renewed hostilities between Israel and Hamas boosted the appeal of the safe-haven asset. A ceasefire last week had raised hopes that the fight may be over, but as the two sides resumed fighting over the weekend, gold prices were catapulted to a record high.

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 edged higher on Wednesday and the dollar index rose above the 104.1 level. Markets seem to have priced in interest future rate cuts, allowing the dollar to recover. US treasury yields continued to decline, with the US 10-year bond yielding approximately 4.11%.     

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. Gold prices are propped up by expectations that the Fed’s tightening cycle is coming to an end, signaling the start of a Fed pivot. At the latest Fed meeting, FOMC members voted to keep interest rates unchanged at a 22-year high within a target range of 5.25% to 5.50%. Market odds of another rate hike in December have dropped to zero, while markets are pricing in rate cuts as early as March. Expectations that the Fed may start cutting interest rates from the first quarter of 2024 are propping up gold prices.

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: