Gold drops to a 5-week low as the US dollar and rates remain high

14 Aug 2023 , 09:56 AM

In anticipation of this week’s release of the U.S. Federal Reserve’s July meeting minutes, which could provide insight into expectations for future interest rates, gold prices fell to their lowest point in more than five weeks on Monday as the dollar and bond yields rose.

Spot gold was down 0.2% at $1,910.29 per ounce, its lowest price since July 7. U.S. gold futures were down 0.2% at $1,910.29 per ounce, the lowest price since July 7. Additionally, U.S. gold futures fell 0.2% to $1,942.60.

After data on Friday showed producer prices grew slightly more than anticipated in July as the cost of services recovered at the fastest pace in nearly a year, U.S. government yields increased, pushing the dollar to its highest level since July 7. 

The opportunity cost of owning non-interest bearing gold, which is valued in dollars, increases with rising interest rates and Treasury bond yields.

Despite a decline in August consumer confidence, Americans still anticipated a slight decline in inflation over the coming year and beyond, according to a survey released on Friday.

Ahead of China data that is expected to strengthen the case for significant stimulus even as Beijing appears deaf to the cries, Asian equities struggled on Monday. 

Tuesday is the deadline for China’s retail sales and industrial output statistics. The U.S. retail sales statistics on Tuesday and the minutes of the July Fed meeting on Wednesday will both be closely watched by the markets.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings decreased 0.4% to 899.63 tonnes on Friday. 

Data on Friday revealed that COMEX gold speculators reduced their net long position by 23,755 contracts to 75,582 in the week ending August 8.

Last week, India’s physical gold demand increased thanks to a drop in prices, and China’s biggest consumer, where robust central bank buying held premiums unchanged near five-month highs.

Spot silver declined by 0.4% to $22.57 per ounce, platinum fell by 0.5% to $907.76, and palladium increased by 0.1% to $1,294.73 among other precious metals.

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