Gold prices fell on Tuesday as the US dollar and Treasury yields firmed, ahead of economic data and Federal Reserve Chair Jerome Powell’s speech this week, which could steer upcoming interest rate decisions.
Spot gold dropped 0.3% to $1,913.90 per ounce by 0326 GMT, and US gold futures fell 0.4% to $1,925.80.
US Treasury yields rose to their highest in more than a week, and the dollar also gained, making non-yielding bullion expensive for other currency holders, ahead of US retail sales and industrial production later in the day.
“US economic data remains very robust, and with upward pressure on yields persisting and markets only pricing in an about 10% chance of a Fed hike in November, an upside surprise that shows resilient US households could weigh on gold,” Kyle Rodda, financial market analyst at Capital.com said.
Markets speculate Powell’s upcoming speech on Thursday could offer more clarity on the US central bank’s rate stance after dovish signals by top policymakers in the recent weeks.
Higher interest rates increases the opportunity cost of holding gold, a non-yielding asset.
The Middle East tensions, which boosted safe-haven gold prices to over three-week highs on Friday, also added to the uncertainty in the market.
In the short term, the markets are monitoring a possible ground invasion by Israel into the Gaza Strip, an event that would likely catalyze another jump in gold prices, Rodda said.
Tracking a decline in gold prices, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.80% to 855.45 tonnes on Monday.
In other metals, spot silver eased 0.7% to $22.44 per ounce, platinum lost 0.2% to $889.31 and palladium was steady at $1,142.98.