Gold Reclaims $1,700 as US Bond Yields Fall
Gold returned to the $1,700 level on Monday after a drop in US bond yields and a fourth straight day of dollar declines brought more buyers to the yellow metal.
The December gold futures contract on the Comex in New York closed up $30, or 1.8%, at $1,702 an ounce on daily trading volume. Before that, gold last hit $1,700 on September 14.
The spot price of gold bullion, followed more closely than futures by some traders, was up $38.59, or 2.3%, at $1,699.57 as of 16:57 ET (20:57 GMT). Earlier, it had reached a spot session high of $1,701.51.
Gold rose as the Dollar Index, which pits the US currency against the euro and four other rivals, hit a more than one-week low of 111.40 and has lost about 2.2% in four days.
The yield on the US 10-year Treasury note fell to a low of 3.587% on September 22.
The dollar and bond yields fell on hopes that signs of slowing economic growth would force the Federal Reserve to reduce the pace of interest rate hikes.
Two weaker-than-expected economic reports showing that manufacturing activity unexpectedly entered contraction and construction activity was worse than feared added some optimism that the Federal Reserve may have to consider a pivot to avoid pushing the economy into a deep recession.
The ISM manufacturing data for September fell to 50.9 from 52.8, well below economists’ forecasts for a drop to 52.2. A reading above 50 on the ISM index indicates expansion in manufacturing, which accounts for about 12% of the US economy.
Sevens Report Research said in a research note on Monday that “the fundamental backdrop for gold is less bearish” as “Treasury yields and the dollar may be nearing a peak.”
However, it added that “if we do not see a top in yields and the dollar,” investors should expect the precious metal to retrace to fresh lows.
In a separate outlook, ICICI Bank said downside risks remain for gold as “major central banks are expected to continue to aggressively raise interest rates to combat rising inflation.”
The potential for the Fed to resume large-scale rate hikes to curb US inflation has been the main driver for gold and other markets.
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