© Reuters.
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Investing.com – With a train still outpacing everyone and nearing a 20-year high on expectations of a US interest rate hike, gold continues to take record losses that it fails to recover by the day .
Gold prices have stabilized today, Friday, near their lowest level in two years, and are on track to record their worst weekly performance in two months, after expectations of a significant rise caused a rise. in bond yields, extinguishing the luster of the precious metal.
Prices now
And gold is now down 0.1% in spot trades to $ 1662.97 an ounce, after hitting its lowest level since April 2020 at $ 1658.30. Prices have fallen 3.2% since the beginning of the week so far.
US gold futures are now down 0.4% to $ 1,670.50.
At a time when 10-year yields are close to their highest level since June, the dollar is set to record a weekly rise against its rivals.
Gold is very sensitive to rising US interest rates because it increases the opportunity cost of holding non-productive bullion.
dollar now
The US dollar strengthened early in European trading on Friday as concerns about rising interest rates and a possible recession dampened risk appetite.
The dollar index, which measures the greenback against a basket of six other currencies, is now up 0.2% to 109.745, not far from a two-decade high of 110.79.
Fears of a global recession are growing with many central banks aggressively tightening monetary policy to fight inflation at historic levels.
It is highly anticipated that the Bank of England will raise interest rates at its meeting for the seventh consecutive week next week.
This pessimistic economic assessment affected currencies considered to be riskier and the dollar became the main beneficiary.
Expectations of a bigger collapse
Economists in the TDS group had expected it to continue its heavy losses in the next period, coinciding with the price break of the strong support level at 1700 an ounce.
The bank’s experts indicated that outflows from money managers and ETF holdings are expected to continue, which will have a major negative impact on prices, ultimately increasing the possibility of gold plummeting to unprecedented levels.
TDS economists explained that the US Federal Reserve is continuing its efforts to curb inflation and, in this context, it is expected to raise interest rates by around 75 basis points at the Fed meeting next week and by around others. 75 basis points in November, then another 50 basis points in December, and all this tightening of the Cash policy will have a strong negative impact on gold.
Disastrous data from time to time
Although gold is a safe haven currency to protect against inflation and economic turmoil, higher interest rates increase the opportunity cost of holding zero-yielding gold, which increases the dollar’s strength at the expense of gold.
Data released yesterday in the US showed a recovery in US retail sales in August after a contraction was expected, despite slowing demand in light of the Federal Reserve’s continued tightening of monetary policy to fight inflation. , and the number of new unemployment claims fell significantly this week.
Better-than-expected retail sales data, coupled with more-than-expected inflation data released on Tuesday, have raised expectations of further tightening of monetary policy, with many economists now expecting the Federal Reserve to raise interest rates by 100 basis points when it meets next Wednesday, pushing gold towards a steep decline.
IG Markets analyst Yip Jun Rong believes bearish momentum may continue to push gold prices to complete the decline until next Wednesday’s Federal Open Market Committee meeting amid investor expectations of a steep rate hike of interest.
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