Gold prices remained steady near a three-week low on Thursday, as the latest data on U.S. producer prices and retail sales sparked concerns about the prolonged period of higher U.S. interest rates. This scenario had a ripple effect, boosting the value of the dollar and bond yields.
Around 1:47 p.m. EDT (1747 GMT), spot gold saw a modest 0.1% increase, reaching $1,909.05 per ounce, following a dip to $1,900.81, which marked its lowest point since August 23. Meanwhile, U.S. gold futures showed minimal movement, settling at $1,932.80.
David Meger, the director of metals trading at High Ridge Futures, noted, “We observed some inflationary data that exceeded expectations, and as a result, we are witnessing a resurgence in yields, once again applying pressure to the spot gold market.”
Data unveiled that U.S. producer prices surged by 0.7% in August, the most significant increase in over a year. Simultaneously, U.S. retail sales surpassed Reuters’ expected 0.2% rise, with a 0.6% increase during the same period.
The U.S. dollar index displayed an impressive 0.6% surge, reaching a six-month high. This development diminished the attractiveness of gold for international investors, while the yield on the benchmark 10-year note also inched higher.
Meger highlighted, “There are apprehensions that the Federal Reserve may continue to raise interest rates or that yields will persistently climb, exerting pressure on the gold market.”
Even though market sentiment is currently leaning towards the expectation that the Fed will keep rates unchanged at its upcoming policy meeting next week, there remains a 39% probability of a rate hike in November, according to the CME’s FedWatch Tool.
Higher interest rates typically dampen the allure of bullion, which inherently bears no interest.
In earlier news, the European Central Bank opted to raise its key interest rate to a record high of 4% on Thursday. However, it indicated that this might well be the last such move in the near future.
Despite the prevailing market dynamics, analysts noted that the $1,900 level for gold appears to have a solid support base and may attract some bargain hunting.
In the broader spectrum, silver saw a decrease of 0.8%, settling at $22.66 per ounce after hitting a four-week low, while platinum displayed a 0.6% rise, reaching $905.87.
Palladium, on the other hand, experienced a 1% decline, settling at $1,246.10, following a recent peak reached over a three-week period.