Gold Sees Modest Dip Amidst Robust US Economic Data, Dollar Strengthens

Gold prices remained in close proximity to a three-week low on Thursday, following the release of U.S. producer prices and retail sales data that surpassed expectations. The robust data has ignited concerns that U.S. interest rates are poised to maintain an upward trajectory, consequently bolstering the dollar and bond yields.

As of 1:47 p.m. EDT (1747 GMT), spot gold saw a marginal increase of 0.1%, settling at $1,909.05 per ounce, after briefly touching $1,900.81, marking its lowest point since August 23. Meanwhile, U.S. gold futures experienced minimal change, concluding at $1,932.80.

David Meger, the Director of Metals Trading at High Ridge Futures, noted, “We saw some headline inflationary data that was hotter than expected and as a result, we are seeing yields tick higher once again and continue to pressure the spot gold market.”

Data unveiled a 0.7% surge in U.S. producer prices for August, marking the most significant increase in over a year. Simultaneously, U.S. retail sales registered a 0.6% rise, surpassing Reuters’ projection of 0.2% for the same period.

The U.S. dollar index experienced a notable 0.6% surge, reaching a six-month high. This surge diminished gold’s allure for international investors, while the yield on the benchmark 10-year note also inched upwards.

Meger highlighted the concerns that the Federal Reserve could potentially persist with interest rate hikes or witness a continued rise in yields, which would exert pressure on the gold market.

While the market is currently pricing in the likelihood of the Fed maintaining rates at their policy meeting next week, the CME’s FedWatch Tool indicates a 39% probability of a rate hike in November.

Higher interest rates tend to diminish the attractiveness of bullion, which does not yield interest.

Earlier in the day, the European Central Bank implemented a notable increase in its key interest rate, elevating it to a record high of 4%. However, the bank signaled that this adjustment is likely to be its final move.

Despite the dip, the $1,900 level for gold remains relatively robust and is expected to entice bargain hunters, according to analysts.

In the precious metals market, silver experienced a 0.8% decline, settling at $22.66 per ounce after hitting a four-week low. Platinum, on the other hand, witnessed a 0.6% rise, reaching $905.87. Palladium saw a 1% decrease, concluding at $1,246.10, following a three-week peak.

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