Gold prices fell on Tuesday, supported by a decline in bond yields and the dollar, despite expectations that the Federal Reserve (the US central bank) will keep interest rates high for a longer period after strong US data kept gold near its lowest level in six weeks.
The spot gold price settled at $1907.60 an ounce, after hitting its lowest level since June 29 at $1895.50 earlier in the session.
Gold futures settled down 0.2% at $1,940.20.
US retail sales jumped 0.7% last month, the Bureau of Commerce said Tuesday, indicating that the economy continued to expand at the start of the third quarter. Economists polled by Reuters had expected retail sales to rise 0.4%.
“A great retail sales report, which suggests the economy is not weakening, will force the Fed to keep the possibility of a rate hike on the table,” said Edward Moya, senior market analyst for Latin America at OANDA.
He added: $1900 an ounce is an important level for many traders when focusing on gold. Sometimes it can trade very technically and we can see some major support around that level for gold prices.
On the other hand, the US benchmark 10-year Treasury bond yields declined after hitting a 10-month high earlier. The dollar index fell 0.3% against its rivals, making gold less expensive for holders of other currencies.
According to CME's FedWatch Tool, the probability that the Fed will leave interest rates unchanged this year is 57%. The Fed since March 2022 has raised its benchmark interest rate by 525 basis points to the current range of 5.25%-5.50%.
Higher interest rates increase the opportunity cost of holding bullion.
While holdings of the world's largest gold exchange-traded fund, SPDR Gold Trust, fell to their lowest level since January 2020 on Monday.
Spot silver remained unchanged at $22.62 an ounce, platinum fell 1.2% to $891.25, and palladium fell 2% to $1,244.56.
