Gold prices fell on Friday as a stronger US dollar and rising Treasury yields weighed on the precious metal, putting it on course for a second consecutive weekly decline.
Investors are now awaiting a closely watched US employment report, particularly the non-farm payroll figures, which could provide fresh indications about the Federal Reserve’s approach to interest rates. The data are being monitored closely because the strength of the US labour market can influence expectations about future monetary policy.
At 8:05am Bangladesh time on Friday, spot gold was down 0.6 per cent at $4,154.78 an ounce. The metal had already fallen by more than 3 per cent over the course of the week. US gold futures also declined, slipping 0.4 per cent to $4,184 an ounce.
The stronger dollar has added to the pressure on gold. As the metal is priced internationally in US dollars, a rise in the value of the currency makes gold more expensive for buyers using other currencies. That can weaken demand and put downward pressure on prices.
Another significant factor has been the rise in US Treasury yields. On Thursday, yields on 10-year and 30-year Treasury bonds reached their highest levels since 2002. Higher yields can make interest-bearing assets more attractive compared with gold, which does not provide regular interest income.
The relationship between interest rates and gold is closely watched by financial markets. When borrowing costs and yields rise, the opportunity cost of holding a non-yielding asset such as gold increases. Conversely, expectations of lower rates can support the metal by reducing that opportunity cost.
Kyle Rodda, a senior financial market analyst at Capital.com, said investors were monitoring expectations for US interest rates alongside geopolitical developments in the Middle East. He said the non-farm employment figures would be particularly important in shaping expectations about interest rates.
According to Rodda, stronger-than-expected employment data could increase expectations of another Federal Reserve rate increase, potentially putting further pressure on gold prices. The September non-farm payroll report was scheduled to be released at 6:30pm Bangladesh time.
Recent comments from Federal Reserve policymakers have also influenced market expectations. Two policymakers this week indicated that they wanted to see additional economic data before supporting another rate increase. That has left investors weighing incoming figures on employment, inflation and other areas of the US economy.
Data released on Wednesday showed that US inflation rose less than expected in August. Price pressures in the previous month were also weaker than initially indicated in earlier data. The figures contributed to a sharp change in market expectations for a possible rate increase during the current month.
Market participants were putting the probability of a rate increase this month at around 25 per cent, down from roughly 70 per cent at the beginning of the week. Expectations for a rate increase in December remained considerably higher, with traders estimating the probability at around 79 per cent.
The employment report could therefore become an important reference point for markets trying to assess the Federal Reserve’s next steps. A stronger labour market could reinforce expectations for tighter monetary policy, while weaker employment figures could alter those expectations.
Geopolitical developments are also being closely monitored by precious-metals investors. Sources said Iran was preparing for a broader and tougher response if the United States launched another major military attack. Tehran was also continuing diplomatic efforts to seek a solution, although some Iranian officials privately believed the chances of success were limited.
The Middle East situation adds another layer of uncertainty to the gold market, as geopolitical tensions can influence demand for assets traditionally viewed by investors as stores of value. In Friday’s trading, however, the pressure from the stronger dollar and higher Treasury yields remained evident.
Other precious metals also recorded mixed movements. Silver fell 0.5 per cent to $60.53 an ounce, while platinum declined 0.4 per cent to $1,716.93. Palladium moved in the opposite direction, rising 0.1 per cent to $1,172.80 an ounce.
Despite the modest daily rise in palladium, all three metals were heading for weekly declines. The precious-metals market is therefore being influenced by a combination of currency movements, Treasury yields, expectations about US monetary policy and geopolitical developments.
For gold traders, the immediate focus remains on US employment data and what it could mean for the Federal Reserve’s interest-rate outlook. Any significant shift in those expectations could have a direct bearing on the dollar, Treasury yields and the direction of gold prices.
