Gold prices experienced a decline on Tuesday, influenced by increased U.S. bond yields, as investors anticipate inflation data that might clarify the extent of a forthcoming interest rate reduction by the Federal Reserve in the next month.
Spot gold decreased by 0.1% to reach $2,515.09 per ounce as of 11:37 a.m. ET (1537 GMT), after slightly dropping from the all-time high of $2,531.60 recorded last week. U.S. gold futures also dropped by 0.2% to $2,550.40.
Jim Wyckoff, a senior market analyst at Kitco Metals, noted in a report that some short-term speculators are taking profits following recent gains. He also mentioned external market factors that might negatively impact bond yields.
The U.S. 10-year yields increased, making gold, which does not yield interest, less appealing to foreign buyers. Investors are now focusing on the Personal Consumption Expenditures (PCE) data, a crucial inflation report and the Fed's preferred measure of inflation, due on Friday.
Wyckoff added that if inflation data exceeds expectations, it could slightly affect the Fed's policy, but it is certain that interest rates will be cut in September and possibly later this year. According to the CME FedWatch tool, traders predict a 65.5% chance of a 25-basis-point rate cut in September and a 34.5% probability of a 50-bp reduction.
Despite the recent decline, gold remains above the psychological threshold of $2,500 per ounce and is on track for its best year since 2020, fueled by investor optimism about upcoming U.S. rate cuts and ongoing concerns about the Middle East conflict.
Commerzbank commented that much of the positive news for gold might already be reflected in its current price. They believe that gold does not have significant upside potential at the moment. Instead, they see more opportunities in other precious metals that have not yet matched gold's recent performance.
Among other metals, spot silver increased by 0.1% to $29.93 per ounce, while platinum fell by 0.8% to $953.98 and palladium rose by 1.1% to $969.61.
