Gold Futures Prices Decline as Dollar Strengthens and US Government Bond Yields Rebound
Gold futures prices have experienced another drop, falling below the significant $1,940 level. This decline is attributed to the strengthening of the dollar and the rebound in US government bond yields.
As of 9:42 pm Thai time, gold contracts on the COMEX (Commodity Exchange) market for December have fallen by $9.80 or 0.50%, reaching $1,935.80 per ounce.
The attractiveness of gold diminishes with a stronger dollar since it increases the cost of gold contracts for holders of other currencies. Furthermore, the rebound in US government bond yields raises the opportunity cost of holding gold, as gold is an asset that does not generate interest income.
Concerns regarding the Federal Reserve (Fed) maintaining high interest rates persist and exert downward pressure on the market. During its recent Monetary Policy Committee (FOMC) meeting, the Fed decided to maintain short-term interest rates at 5.25-5.50%, the highest level in 22 years. Fed officials have even signaled the possibility of another interest rate hike by the end of the year, as indicated by their interest rate policy projections.
Michelle Bowman, a member of the Federal Reserve’s board of governors, emphasizes the need for continued interest rate hikes to combat inflation. She believes that current economic data reflects inadequate growth to meet the inflation target.
Boston Fed President Susan Collins echoes this sentiment, supporting further interest rate increases in the face of slowing inflation. Collins remarks that although recent inflation data appears satisfactory, it is premature for the Fed to declare victory. She suggests that the Fed should consider maintaining high interest rates for a longer period and not rule out the possibility of future hikes.
Market participants are closely monitoring the prospects of a US government shutdown on October 1, should Congress fail to make progress in passing a temporary budget before September 30, awaiting President Joe Biden’s signature.
Gold futures prices continue to fall. Most recently, it fell below the $1,940 level, which was affected by the strengthening of the dollar. and the rebound in US government bond yields.
At 9:42 pm Thai time, gold contracts on the COMEX (Commodity Exchange) market will be introduced in December. less $9.80 or 0.50% to $1,935.80/oz.
A stronger dollar reduces the attractiveness of gold. By making gold contracts more expensive for holders of other currencies Meanwhile, a rebound in US government bond yields will increase the opportunity cost of holding gold. This is because gold is an asset that has no interest income.
The market was also under pressure from concerns about the Federal Reserve (Fed) keeping interest rates high for a long time to prevent inflation.
The Fed’s Monetary Policy Committee (FOMC) decided to maintain short-term interest rates at 5.25-5.50% at last week’s meeting. which is the highest level for 22 years
However, when predicting the interest rate policy (dot plot), feeding officials signal another increase in the interest rate by the end of this year. and is indicative of only two interest rate cuts in 2024, from the Fed’s original forecast that there would be more than two interest rate cuts next year. This is a sign that the Fed will keep interest rates high for a longer period than expected to prevent inflation.
Michelle Bowman, a member of the Federal Reserve’s board of governors, said the Fed needs to keep raising interest rates to prevent inflation.
“I continue to expect that the Fed will need to continue to raise interest rates to get inflation back to target in a timely manner,” Ms Bowman said, adding that economic data indicated that there was insufficient growth from length in terms of preventing inflation. target %.
Bowman’s statement echoed that of Boston Fed President Susan Collins, who has said she supports further increases in interest rates. If inflation continues to slow
“The recent inflation data is satisfactory. But it is still too early for the Fed to declare victory. “
“I believe the Fed should keep interest rates high for longer than expected. And the Fed should not rule out the option of raising interest rates again. Feeder officers should be ready to carry out their assigned missions,” Ms Collins said.
Markets are watching for a US government shutdown or shutdown on October 1 if Congress still makes no progress in passing a temporary budget. and forward it to President Joe Biden to be signed into law by September 30.
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