Gold stays close to a one-month low as the US dollar continues to rise

27 Sep 2023 , 10:09 AM

As the U.S. dollar strengthened due to the prospect of higher interest rates for a longer period of time, gold prices were under pressure on Wednesday and traded close to the lowest levels in a month reached in the previous session.

Spot gold remained unchanged at $1,900.49 per ounce, barely off its Tuesday-touched low of August 23. To $1,918.20, U.S. gold futures declined by 0.1%.

On Wednesday, the dollar remained close to a 10-month high against its main competitors as Treasury yields remained high due to the possibility of rising U.S. rates for an extended period of time.

Neel Kashkari, president of the Minneapolis Federal Reserve Bank, stated on Tuesday that there is a 40% possibility that the Fed will need to hike interest rates ‘meaningfully’ in order to combat inflation.

The opportunity cost of storing bullion, which is valued in dollars and does not pay interest, increases as interest rates rise.

In September, consumer confidence in the United States hit a four-month low due to ongoing concerns about rising prices and growing recession fears, even though people were largely positive about the labour situation.

The personal consumption expenditures (PCE) price index, the Fed’s favoured inflation indicator, is expected on Friday and will now be the focus of the market.

The U.S. Senate advanced a bipartisan bill on Tuesday that would prevent the government from shutting down in just five days, but the House moved on with a competing proposal that was supported only by Republicans.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings decreased 0.4% on Tuesday.

Data released on Tuesday revealed that China’s gold imports via Hong Kong increased in August compared to the previous month. The issuing of new quotas to local banks is likely to increase shipments into the world’s largest gold consumer.

Spot silver prices decreased by 0.6% to $22.72 per ounce, while platinum prices decreased by 0.2% to $901.95 and palladium prices increased by 0.2% to $1,226.32.

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