Gold prices weakened again at the close of trading on Tuesday, August 6, 2024, due to the strengthening of the dollar and rising US bond yields. This occurred despite expectations of a US interest rate cut in September and escalating geopolitical tensions in the Middle East, which kept gold prices relatively stable after a sharp decline in the previous session.
According to Reuters, spot gold prices fell 0.6% to $2,393.98 per ounce. The metal had dropped 1.5% in the previous session, driven by global selling pressure amid fears that the United States might enter a recession.
The dollar index (.DXY) rose 0.2%, marking its first day of trading higher against the Japanese yen this month. This increase made gold priced in the greenback less affordable for foreign buyers. The benchmark 10-year US Treasury yield also rose.
“There is still some weakness in gold primarily driven by the strengthening dollar… however, the macro environment for gold is relatively positive, so we might see some range-bound trading for gold in the near term,” said Amelia Xiao Fu, head of commodity market strategy at BOCI.
In Lebanon, Hezbollah militants launched a series of drone and rocket attacks on northern Israel.
Meanwhile, Federal Reserve policymakers dismissed the notion that weaker-than-expected July jobs data indicated the economy was plunging into a recession. However, they also warned that interest rate cuts would be necessary to avoid such an outcome.
Gold is considered a safe-haven asset during economic uncertainty and benefits from a low-interest-rate environment.
Investors are anticipating that central banks will cut interest rates, which would limit gold’s potential downside or even lift it to new record highs, said Fawad Razaqzada, a market analyst at Forex.com, adding that he expects gold to reach $2,500 in the short term.
The market sees a 100% chance of an interest rate cut in September, according to the CME FedWatch Tool.
Meanwhile, silver prices in the spot market fell 0.4% to $27.16 per ounce, while platinum rose 1.2% to $917.10 per ounce.
“The trend towards climate-neutral solar power generation is likely to continue regardless of economic developments. However, there are headwinds from declining electric vehicle sales, which also use silver,” Commerzbank said in a note.
Palladium prices rose 3.6% to $880.25 after hitting their lowest level since 2017 on Monday due to recession fears.