Gold's decline amid market panic

Company News

by Glenn Dyer

Gold continues to be the chief victim of market panic about rates and the Fed's "higher for longer" policy approach. Despite a dip in the value of the dollar, gold futures closed at a six-month low with little sign of support appearing. Comex Gold for December delivery closed down $US12.30 on the day, ending at $US1,883.600 an ounce, the lowest since March 10.

Gold has fallen by around 4%, from around $US1,967 an ounce on September 20, the day the Fed released its latest decision and new estimates for rates and growth, showing a strong economy and fewer rate cuts in 2024, plus one more rise this year. Gold is down more than 4% in the past month, and the year-to-date gain has been cut to just under 3%. However, it remains up more than 12% over the last 12 months.

Gold has suffered due to a strong dollar and rising treasury yields (as investors sell bonds) following the Federal Reserve's hawkish outlook last week that suggested another hike to interest rates before year-end.

"High bond yields and a strong greenback are exerting downward pressure on gold prices. But uncertainty is almost entirely negating their impact as investors seek out safe havens like gold. We, therefore, expect the price of gold to slip slightly over the coming months to end the year at around US$1,880 per ounce," wrote Desjardins Economics.

The dollar moved lower early on Thursday, making gold slightly more affordable for foreign buyers, but to little avail. The ICE dollar index was last seen down 0.5 points to 106.14. The weakness in the greenback saw the Aussie dollar regain the 64 US cent level, trading around 64.24 in early Asian dealings on Friday.

Treasury yields were mixed. The yield on the US two-year security was last seen down 5.0 basis points to 5.092%, while the 10-year bond was last seen paying 4.624%, up 0.8 basis points, after earlier touching 4.684%, the highest since 2007.

After weakening earlier in the week, Comex copper bounced more than 2% on Thursday, closing above $US3.71 a pound, despite more glum news from Chinese property companies.

In Singapore, iron ore futures also went against the stronger dollar, edging up to $US118.55 a tonne for 62% Fe fines delivered to northern China.

The volatility in bonds has made many investors very nervous.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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