Gold continues to register sharp losses in Tuesday’s trading, affected by rising U.S. Treasury yields and increasing expectations of tighter Federal Reserve monetary policy.
Figures
- Spot gold: fell to around $4,326.35 per ounce (-2.14%, or about $95.38)
- Gold futures contracts: fell to around $4,374.24 (-1.78%)
This drop comes after gold last week hit its highest level in more than 3 months, before coming under heavy pressure following statements by Federal Reserve Chair Kevin and the hawkish workshops.
The main reason: Federal statements
Michael Barr, a member of the Federal Reserve Board of Governors and a permanent voting member of the Federal Open Market Committee, said he would be willing to support an interest-rate hike if inflation did not cool enough. This stance was consistent with the more hawkish message and workshops at Jackson Hole. As a result, the likelihood of a U.S. rate hike in September, according to market pricing, rose to around 66%.
Why is gold affected by this?
Gold does not provide periodic returns to its holders. Higher interest rates and bond yields make income-generating assets more attractive, increasing the opportunity cost of holding gold. In addition, the U.S. dollar benefited from changing rate expectations, which further weighs on dollar-priced gold.
Notable point
Despite military tensions in the Middle East (which usually support gold as a safe haven), this time they pushed up oil prices and increased fears of inflation. The impact was negative for gold instead of supporting it.
What’s next?
All eyes are on the ADP jobs report on Wednesday, and the non-farm payrolls report on Friday. Strong employment data could reinforce monetary hawkishness and increase pressure on gold, while a clear slowdown in the labor market could give gold a chance to recoup some of its losses.
Technical levels
Spot gold is approaching the $4,300 level, while the area around $4,370 is considered an important watch point. Analysts believe this is a sharp correction within a larger uptrend supported by central bank buying, and not necessarily a complete reversal of the long-term trend—though it remains dependent on upcoming inflation and jobs data.
*This content is for news purposes only and not investment advice.
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