Gold prices took a sharp dive today, hitting their lowest point since mid-September at nearly $2,540 per ounce. This marks the sixth consecutive day of losses for the precious metal in spot trading. The drop in gold prices is attributed to various factors, including the flow of inflation and labor market data in the US, which has dampened expectations of a rate cut in 2022.
Recent data on initial weekly unemployment claims and producer price inflation have been lower than expected, indicating a stronger economy. This has led to a decrease in hopes for a rate cut by the Federal Reserve next year, causing gold prices to suffer. The Fed’s probability of cutting rates in January is now at 28%, down from over 60% a month ago.
Additionally, the rise in the yield on the 10-year Treasury note to its highest level since last July at 4.48% has pushed real yields to their highest levels since 2015. This has put pressure on gold prices as high-yielding bonds become more attractive to investors.
On the geopolitical front, gold may find support as a safe haven asset amidst uncertainties surrounding Trump’s expected policies and the actions of the next Republican administration. Issues such as the ongoing conflict in Ukraine and the potential annexation of territories by Israel are contributing to a sense of instability in the global landscape.
The situation in the Middle East is also adding to concerns, with the possibility of further escalation in the region under the new administration. Calls for annexation of territories and tensions with Iran could lead to disruptions in oil flows, impacting gas prices and inflation.
Overall, the outlook for gold prices remains uncertain as economic data and geopolitical developments continue to influence market sentiment. Investors will be closely watching for any signals from the Federal Reserve regarding future monetary policy decisions, which could further impact the price of gold in the coming months.
