Gold fell to a two-month low on Wednesday as prices dropped to $4,096.13 per ounce. Silver also sank below $60 amid rising US Treasury yields and a stronger dollar. Investors now wait for Federal Reserve minutes to see if interest rates will rise further, which keeps pressure on precious metals.
Gold and silver are under pressure, and their prices have fallen sharply from the previous day's close. On Wednesday, gold fell to a two-month low due to a strong US currency and rising Treasury yields.
Spot gold declined 1.6% to about $4,096.13 per ounce, the lowest level since August 5. Gold is on the verge of breaking the $4,000 barrier, only to sink below it. The price of silver has fallen by more than 2.6%, trading below $60.
In the Indian markets, MCX data shows gold trading at Rs 1,46,961 per ten gram, and silver trades around Rs 2,20,500 per kg.
The Fed minutes everyone is waiting for
Investors were waiting for the Federal Reserve's September meeting minutes to determine their next policy measures. The minutes are due on Wednesday.
Worries about rising inflation and a tighter monetary policy are far from over. Kansas City Fed President Jeff Schmid said interest rates may still need to rise to keep inflation under control. San Francisco Fed President Mary Daly said the policy choice would be based on whether inflationary pressures were transient or persistent.
Is a rate hike still on the table?
According to CME FedWatch, markets mainly expect the Fed to hold rates constant in October following weaker job market data. But they still price in an over 80% chance of a December rate hike. That matters for gold. Higher interest rates diminish the attractiveness of non-yielding gold.
Oil is climbing again
Oil price has also started climbing again. Oil prices rose on continued Middle East supply risks and a storm heading for oil-producing regions in the United States. Brent oil is above $101, jumping 1.35% over the previous session.
Treasury yields return to 2002 levels
Rising bond yields continue to signal a higher interest rate scenario ahead. The yield on the US 10-year Treasury note rose to 5.32% on Wednesday. It is a level last seen in 2002. The jump reversed some of the relief seen in the previous session.
A stronger dollar makes gold costlier abroad. The US dollar index climbed 0.7%. This makes greenback-denominated gold more expensive for holders of other currencies.
Is the long-term gold story still intact?
Gold is down 5% YTD and silver has lost 20% so far this year. However, the long-term sentiment toward gold remains bullish. Delegates at the London Bullion Market Association's annual conference in Italy predict that gold will reach $5,013 per ounce in the next 12 months.
Meanwhile, China's central bank raised gold purchases in September, extending its buying run to 23 months, according to World Gold Council data.