Gold is Subject to Further Decline

• At the beginning of this week’s trading, gold futures declined, driven by the continued strength of the US dollar and rising Treasury bond yields.
• The yellow metal was trading roughly flat last week, with the odds of a longer US interest rate hike.
• But market analysts say that the recent trading range is most likely the new normal trend in 2024.
• According to the performance, the XAU/USD gold price has fallen to the support level of $1915 per ounce and is stable around it at the time of writing the analysis.

Gold prices XAU/USD fell 0.7% this month, paring its gains since the start of 2023 to less than 6%. In the same performance, the prices of silver, which is the sister commodity of gold, struggled to stay above the level of $24 per ounce at the beginning of this week’s trading. The price of the white metal has fallen by nearly 4% this month and has been down more than 3% for the year.

The two biggest factors in the metals market are the strength of the US dollar and bond yields. In this regard, the US dollar index (DXY), which is a measure of the US currency against a basket of other major currencies, has advanced to 105.95. Overall the index has risen by 2% this month and is up by approximately 2.3% since the beginning of the year.

The rise in the value of the US dollar is bad for goods priced in dollars because it makes their purchase more expensive for foreign investors. Treasury bond yields rose mostly across the board, with the ten-year bond yield rising 8.5 basis points to 4.525%. The yield on the two-year bonds did not change at just over 5.12%. 30-year bond yields advanced by more than 12 basis points to 4.645%.

The Federal Reserve’s indication that it may raise US interest rates again this year and the possibility of leaving interest rates high for a long period of time has led to a rise in yields. Of course, gold is usually sensitive to interest rate movements because it affects the opportunity cost of holding the bullion that does not yield a return. The Federal Reserve is likely to keep interest rates high until next year. The Federal Reserve is trying to ensure that high inflation returns to its target, saying last week that it is likely to cut interest rates in 2024 by less than previously expected. The main interest rate at its highest level since 2001.

CNBC says the US housing market could play a role as well. I reported that one factor that could play a role in that is the possible shutdown of the US government, which will begin on October 1st if Congress cannot resolve the ongoing federal budget negotiations. The situation remains tense as little progress appears to have been made over the weekend.

For the other metal markets, copper futures fell to $3.67 per pound. Platinum futures fell to $916.60 an ounce. Palladium futures fell to $1236.00 an ounce.

The continuation of the strength of the US dollar still supports the bears in moving the price of gold XAU/USD towards stronger support levels. The next most important target will be the support level of $1900 per ounce which may stimulate the current performance to move towards the support level of $1885 per ounce. It is better to think about the return of buying gold without risk, where the market finds factors that support it, despite the strength of the dollar, there will be global geopolitical tensions and fears of a global economic recession. According to the performance on the daily chart below, the bulls’ confidence in controlling the direction will not return without the XAU/USD gold price moving towards the resistance level of $1945 per ounce again.

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