Gold’s retreat has cut sharply into an earlier peak of around $5,400 per troy ounce. It was trading at about $4,140 per troy ounce, and spot gold stood at $4,134.91 an ounce at 7:47am Singapore time on 20 October, down 0.1% from the previous session.
The immediate pressure came as global oil prices neared their highest level in five months. Higher oil prices have added to inflation concerns, leaving investors focused on whether the Federal Reserve will keep borrowing costs high or raise them again.
Gold does not pay interest, so higher rates can weaken its appeal against assets that offer a return. Rising US Treasury yields and renewed expectations of Federal Reserve rate increases have weighed on non-yielding assets.
Fed Chair Kevin Warsh signalled support for holding rates unchanged before next week’s Federal Open Market Committee meeting. The market-implied probability of a 0.25 percentage-point increase this month has fallen to below 20%, from about 67% at the end of last month. Even so, markets put the chance of one further increase in the Fed’s benchmark rate by year-end at about 90%.
The price decline has been substantial. Gold fell more than 6% last month and has dropped by more than 10% since August. It has mostly remained above $4,100 an ounce this month.
Gold shed 4% in the previous session and touched a more than seven-week low on Monday. It has suffered one of its most unusual one day declines in two decades.
Since the US-Iran conflict began in late February, gold has remained down about 20%. The fall has occurred alongside rising oil prices and expectations of higher rates.
Investors are abandoning gold en masse for government bonds. That shift reflects the central problem for holders of bullion: inflation fears can support the case for tighter monetary policy, while higher yields make bonds more attractive than an asset with no interest payment.
Other precious metals also declined. Spot silver fell 0.3% to $56.93 an ounce, while platinum and palladium edged lower.
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