Gold prices drop over 1% as dollar and Treasury yields remain steady
On Monday, gold prices slipped more than 1% as the dollar and Treasury yields held firm following strong U.S. data that raised doubts on whether the Federal Reserve would implement three interest rate cuts this year.
FUNDAMENTALS
Spot gold was down 1.1% at $2,305.09 per ounce, after reaching a record high of $2,330.06 on Friday. Meanwhile, U.S. gold futures edged 0.9% lower to $2,324.20 per ounce.
The impact of U.S. economic data on gold prices
The dollar gained 0.1% against its rivals, leading to gold becoming less attractive for holders of other currencies. Additionally, benchmark U.S. 10-year Treasury yields rose. U.S. job growth exceeded expectations in March, with wages also rising steadily. This suggests that the economy finished the first quarter on a strong note, potentially delaying anticipated interest rate cuts by the Federal Reserve.
Insights from Minneapolis Fed President Neel Kashkari
Minneapolis Fed President Neel Kashkari indicated that at the central bank’s meeting last month, he anticipated two interest rate cuts this year. However, if inflation remains stagnant, no cuts may be necessary by year-end. Higher interest rates diminish the appeal of holding non-yielding gold.
Regional insights on gold demand
Notably, physical gold demand in India was subdued last week due to a significant rally in domestic prices deterring buyers. Meanwhile, premiums remained stable in China, the top consumer of gold.
Potential market movements
Asian markets are set to begin a week filled with key local economic indicators and policy decisions on an optimistic note. Additionally, U.S. Treasury Secretary Janet Yellen expressed concerns about China’s excessive industrial capacity during discussions with Chinese Premier Li Qiang.
Other precious metal reactions
In terms of other precious metals, spot silver fell 1.9% to $26.95 per ounce, platinum dipped 0.5% to $922.80, and palladium dropped 1.3% to $989.75.
