- There are concerns about the enduring impact of elevated interest rates.
- There was a decline in the number of Americans filing new claims for jobless benefits.
- China’s economic situation remains a concern for investors.
Gold was headed for its fourth consecutive weekly decline as longer-term US Treasury yields surged to a 10-month peak on Thursday. This surge in yields, concerns about the enduring impact of elevated interest rates, and a struggling Chinese economy accelerated the decline of gold prices.
The benchmark 10-year yields climbed to 4.312%, testing October’s 4.338%, before easing to 4.29%. Additionally, the 30-year yield reached its highest level in 12 years. The yield increase was fueled by a consistent stream of economic data surpassing expectations.
Additionally, minutes from the last meeting of Federal Reserve officials indicated a continued focus on controlling inflation. These factors boosted yields while weighing down on gold.
Analysts say the dollar’s trajectory must shift from its current bullish trend for gold to recover. The duration of gold trading below $1,900 levels will depend on how long the dollar remains strong due to high bond yields.
In the released minutes from the Fed’s July rate-setting meeting, policymakers disagreed on the necessity of further interest rate hikes. Some expressed concerns about the risks of excessive rate increases to the economy, while most emphasized the ongoing significance of addressing inflation.
US jobless claims (Source: US Labor Department)
Adding to the economic landscape, the US Labor Department reported a decline in the number of Americans filing new claims for jobless benefits, suggesting the tight labor market could extend the Fed’s efforts to cool down the economy. Several reports earlier in the week, including strong US retail sales, indicated that the Federal Reserve might have to maintain higher interest rates for an extended period.
In contrast, China’s economic situation remained a concern for investors, with data and turmoil in the property sector painting a bleak picture of the nation’s recovery post-pandemic. The troubled asset manager Zhongzhi Enterprise Group’s debt restructuring announcement highlighted the turmoil in China’s $3 trillion shadow banking sector.
Meanwhile, investors anticipate a speech from Fed Chair Jerome Powell on August 25 at the central bankers’ conference in Jackson Hole, Wyoming, where he will address the economic outlook.
Reflecting the pessimistic sentiment among gold investors, the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a decrease in holdings by 6.93 metric tons, reaching the lowest level since January 2020.
