Gold Nears One-Month Low

Gold prices remained under pressure during Tuesday's trading (Sept 15) due to a strengthening US dollar, rising Treasury yields, and expectations of a Federal Reserve interest rate hike. XAU/USD traded around US$4,280 per troy ounce, hovering near the one-month low of US$4,253 touched on Monday.

Pressure on gold stemmed from the US bond market. The 10-year Treasury yield neared 5% again, while the 30-year yield climbed to around 5.40%—its highest level since 2007. Rising yields enhance the appeal of interest-bearing assets while increasing the opportunity cost of holding gold, which yields no return.

The US dollar also remained strong. The Dollar Index hovered around 99.60, nearing a two-week high. A stronger dollar makes gold more expensive for holders of other currencies, adding downward pressure on the precious metal's price.

Expectations regarding Fed policy remain a primary driver. US CPI inflation for August stood at 3.4% year-on-year, while PPI rose to 5.4% from 4.8% in July. High oil prices resulting from Middle East conflicts have further stoked inflation concerns, leading the market to anticipate a rate hike at the Fed's meeting on Wednesday.

Nevertheless, selling pressure on gold has not been overly aggressive, as much of the risk associated with a hawkish Fed is already priced in. The market is now awaiting the latest economic projections and comments from Fed Chair Kevin Warsh to determine whether a September hike will mark the beginning of a prolonged tightening cycle.

Newsmaker Analysis: Gold continues to face a bearish bias in the short term as long as yields and the dollar remain elevated. However, if the Fed raises rates without signaling further aggressive tightening, gold could potentially rebound. Additionally, central bank buying, ETF activity, and concerns regarding global government debt continue to provide medium-term support. (arl)

Source: Newsmaker.id