Gold slips as US yields remain strong

Gold prices slipped on Monday, dropping to $1,650 per ounce, as the US dollar and yields remained strong. If gold prices decline, support may be found near $1,614 per ounce and further down at the 2020 low near $1,441 per ounce. Resistance may be around 1,683 per ounce and higher at $1,729 per ounce.

The dollar price was steady on Monday, with the dollar index fluctuating around the 112 level with low volatility. The absence of a Fed speech on Monday reduced the currency’s usual volatility. US Treasury yields remained strong, with the US 10-year bond yield climbing above 4.25%.

Gold prices are under pressure by the shift of most major Central Banks towards a tighter monetary policy to combat rising inflation rates. Assets yielding interest become a more appealing investment compared to gold as interest rates rise. Rampant US inflation has raised expectations of another steep rate hike at the Fed’s next policy meeting in November, putting pressure on gold prices. The US Central Bank has increased interest rates by a total of 300 basis points this year, bringing its benchmark interest rate to 3.25%. Another 75-bps rate hike is expected at the Fed’s next monetary policy meeting in November and has already been largely priced in by markets. Expectations of sharp rate hikes, boost dollar prices at the expense of competing assets, such as gold.

No FOMC members’ comments are expected this week, as a black-out period started on Saturday, preventing further comments until the central bank’s next policy meeting in November.

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