The prices of gold dropped below the $1,900 an ounce level today as the U.S. dollar went up for the fourth consecutive session. The greenback was buoyed up by the increase in 10-year U.S. Treasury yields that recorded its biggest daily gain in two months, which in turn triggered selling of the yellow metal. The yield growth made the opportunity cost of holding gold more expensive for investors using other currencies.
The downward trend in bullion prices was also influenced by the decline in the Australian dollar since Australia is the second-largest gold producer in the world.
Gold lost around $140 an ounce since the Friday session. Yesterday, spot gold recorded its highest one-day price decline in more than seven years. It is currently trading at $1,931.55 an ounce as of 1001 GMT.
IG Markets analyst Kyle Rodda noted that the gold market appears to have lost its shine due to higher U.S. yields and a stronger dollar. It is now even possible for the bullion to test a support price level at around $1,800 per ounce.
But ING analyst Warren Patterson believes that gold could move back up to $2,000 since central bank policies are likely to remain loose given the resurgence of COVID-19. Investors might also keep buying gold because they use it as a hedge against the pandemic-induced economic slowdown and against currency debasement since central banks are releasing unprecedented stimulus money.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust fell by 0.2% yesterday to 1,257.93 tons.
Meanwhile, the markets will be waiting for the release of the U.S. inflation figures for July due today at around 1230 GMT. The consumer price index is expected to be 1.2% lower compared to the previous month and 1.1% lower compared to the same of the prior year.