Gold prices wallow under $1,900 as Fed fears buoy dollar, yields

Gold prices moved little on Thursday, but hovered around six-month lows as concerns over rising U.S. interest rates kept investors largely biased to the dollar, while Treasury yields also surged.

Both spot prices and gold futures slid below the key $1,900 an ounce level this week, as a rally in the dollar and Treasury yields showed little signs of slowing. The greenback was at a 10-month high, while 10-year yields reached a 16-year peak.

Sentiment worsened as oil prices jumped to 2023 highs on Wednesday, which markets feared could factor into stickier inflation and keep interest rates higher for longer. Fears of a U.S. government shutdown also kept investors largely biased towards safe haven assets.

But the dollar was the key benefactor of increased safe haven demand, especially as the Federal Reserve flagged higher for longer interest rates. Markets are now pricing in an at least 37% probability of a rate hike by the Fed in December, while rates are set to remain above 5% in 2024.

Spot gold fell 0.1% to $1,874.29 an ounce, while gold futures expiring in December were flat at $1,890.95 an ounce by 00:26 ET (04:26 GMT). Both instruments were at their weakest levels since mid-March.

Other precious metal prices were also hit by strength in the dollar, with silver futures down nearly 5% this week, while platinum futures fell 4% this week.

Gold set for steep September losses
Gold prices were now set for an over 3% slump in September, their worst monthly performance since February.

Higher interest rates bode poorly for the yellow metal, given that they push up the opportunity cost of investing in non-yielding assets. This trend had battered gold through 2022, and has also limited the yellow metal’s gains this year.

Gold also has little scope for recovery, with U.S. rates set to remain above 5% until at least end-2024.

Copper sinks as China fears persist
Among industrial metals, copper prices fell further on Thursday, amid fears that higher interest rates will dent economic activity in the coming months.

Copper futures fell 0.4% to $3.6292 a pound, and were close to their weakest levels since mid-March.

Concerns over an economic slowdown in top importer China also weighed on copper, as media reports outlined more government scrutiny against embattled property developer China Evergrande Group (HK:3333).