Amidst a backdrop of geopolitical tensions and uncertainty surrounding monetary policy, gold prices slid on Wednesday. Despite recent record highs, the precious metal navigates through the headwinds of a robust U.S. dollar and climbing Treasury yields.
Spot gold saw a 0.06 percent decrease to $2,381.57 per ounce, as of 5:08 GMT, after hitting an all-time high of $2,431.29 last week. Meanwhile, U.S. gold futures declined by 0.42 percent to $2,397.60.
Geopolitical tensions
The escalation of geopolitical risks in the Middle East has contributed to a surge in safe-haven demand for gold. Investors seeking refuge from uncertain global dynamics propelled spot gold to an all-time high of $2,431.29 per ounce last Friday. Despite the decline in gold prices, ongoing concerns over potential escalations continue to keep market participants on edge.
Monetary policy
Uncertainty surrounding the Federal Reserve‘s monetary policy stance has injected volatility into gold prices. Despite growing speculation of interest rate cuts, top U.S. central bank officials, including Federal Reserve Chair Jerome Powell, refrained from providing clear guidance on timing. This ambiguity has led to shifts in market expectations, with some global brokerages delaying their predictions of rate cuts from June to September.
Moreover, the dollar remained near its five-month peak, making gold less attractive for U.S. dollar holders, thus pushing its prices down. Besides, benchmark U.S. 10-year Treasury yields reached 4.6591 percent, also hovering near the five-month high they recorded in the previous session.
Market sentiment regarding future interest rate cuts has been a significant driver of gold prices. The CME FedWatch Tool indicates a 68 percent probability of a rate cut in September. Lower interest rates enhance the attractiveness of holding non-yielding assets like gold, further supporting its price stability.
Read: U.S. dollar surges to 5-month high as retail sales beat expectations
Other precious metals
Amidst the decline in gold prices, other precious metals witnessed mixed movements. Spot silver experienced a modest 0.3 percent rise to $28.16 per ounce, while platinum fell 0.3 percent to $953.75. However, palladium saw a 0.4 percent increase to $1,017.58.
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