Gold prices were volatile on Wednesday, swinging up and down as the US dollar and Treasury yields rose, while traders awaited further cues to gauge the size of the Federal Reserve's potential interest rate cut in September.
“The rebound in US Treasury yields and the dollar is putting some downward pressure on gold prices, as resilience in US economic data appears to be prompting a reassessment of recession fears in the market,” said IG Market Strategist Yip Jun Rong.
Yip added that gold's decline may be limited by ongoing tensions in the Middle East and ongoing global recession fears, as markets await more economic data to clarify the state of the US economy.
However, a stronger dollar index makes bullion denominated in the greenback less expensive for overseas buyers.
“There is some weakness in gold driven by the strong dollar, but the overall environment for gold is relatively positive, so we are likely to see some activity in the near term,” Amelia Xiaofu, head of commodity markets at Bank of America (NYSE:BAC), said in a note.
Traders have changed their expectations for a rate cut in the wake of last week's weak jobs report, with some expecting a cut of around 105 basis points by the end of the year.
However, markets are also pricing in a 65% chance of the Fed cutting rates by 50 basis points in September, according to the US Rate Tracker available on Investing Saudi Arabia, compared to 85% a day earlier.
Gold at settlement yesterday
Gold futures prices turned lower during Tuesday's trading, pressured by the rise in the dollar.
At settlement, gold futures for December delivery fell 0.55%, or $12.8, to $2,431.60 an ounce, recording losses of 2% since the beginning of August.
Gold and dollar now
Gold futures are now up 0.2% at $2,436 an ounce.
While spot gold contracts rose by about 0.25% to $2,396 per ounce.
On the other hand, the dollar index rose by about 0.27% to 103.03 points.
Other minerals
Spot silver rose 0.1% to $27.0561 an ounce, platinum rose 0.3% to $915.20 and palladium rose 0.3% to $877.24.
