Gold prices experienced a slight decline on Tuesday due to the strengthening of the dollar and increased bond yields. Despite this, the anticipation of a potential US rate cut in September and the rising geopolitical tensions in the Middle East have helped maintain the stability of gold prices following a significant drop in the previous session. By 12:49 p.m. ET (1649 GMT), spot gold had decreased by 0.8% to $2,389.26 per ounce. The metal had previously fallen by 1.5%, influenced by a global sell-off driven by persistent fears of a US recession.
US gold futures also saw a 0.6% decline, reaching $2,430.30. The dollar index increased by 0.3%, marking its first rise against the Japanese currency this month, which makes gold priced in dollars less accessible for international buyers. Additionally, the benchmark US 10-year yields saw an increase. Amelia Xiao Fu, head of commodity markets at BOCI, noted that although gold is currently showing some weakness primarily due to the strong dollar, the macro environment remains relatively positive for gold, suggesting that it may exhibit range-bound activity in the near term.
In geopolitical news, Lebanon's Hezbollah carried out a series of drone and rocket attacks into northern Israel. Meanwhile, Federal Reserve policymakers refuted the idea that weaker-than-expected July jobs data indicates an economy in freefall, but they also cautioned that rate cuts will be necessary to prevent such a scenario. Gold is traditionally viewed as a safe asset during economic uncertainties and thrives in a low-interest-rate environment. Investors anticipate that central banks will reduce interest rates, which should help limit any potential downside for gold, and possibly even propel it to new record highs, according to Fawad Razaqzada, market analyst at Forex.com. He further predicts that gold could reach $2,500 in the short term. The CME FedWatch Tool indicates a 100% chance of a rate cut in September.
Spot silver decreased by 0.6% to $27.12 per ounce, while platinum increased by 1.1% to $916.10. Commerzbank highlighted in a note that the trend towards climate-neutral solar power generation is expected to persist regardless of economic conditions, although challenges are arising from declining sales of electric vehicles, in which silver is also utilized. Palladium rose by 3.2% to $876.40 after reaching its lowest levels since 2017 on Monday due to recession fears.
