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International Gold Prices Rebounded

Summary

On Thursday (September 23), the U.S. dollar index fell by about 0.40%, the largest one-day percentage drop in the next month, and global bond yields soared because as the global economy rebounded, central banks of various countries suggested the possibility of inflation; 10-year US Treasury bond yields jumped 13 basis points to 1.43%. Gold futures fell and hit the lowest closing price in more than six weeks. Market risk sentiment rose. Investors turned to stocks and stayed away from safe-haven assets such as gold. Supported by fuel demand growth and a reduction in US crude oil inventories, U.S. oil refreshed its highest point since August 2 to $73.50 per barrel, as production in the Gulf of Mexico was still blocked after two hurricanes.

Spot gold fell more than US$30 on Thursday, hitting a low since August 11 to US$1,738.12 per ounce. Affected by rising U.S. Treasury yields and investors’ preference for high-risk assets, investors continued to increase support for the Federal Reserve earlier than expected. Preparing for interest rates; rising global stock markets have also put pressure on safe-haven assets.


Jeffrey Halley, senior market analyst for OANDA Asia Pacific, said: “Asian investors may increase gold holdings to prevent new negative developments on the macro side at the weekend.” He also believes that the price of gold may fluctuate in the range of US$1740-1780 in the short term. . Peter Fung, head of precious metals trading at Yongfeng, said that the demand for physical gold has also been stimulated by the continued uncertainty in the macroeconomic environment. The price of physical gold in China, a major gold consumer, is close to US$1,750.


However, analysts generally expect that the major central banks will send a signal to reduce the extremely loose monetary stimulus measures introduced in response to the new crown pandemic, and gold prices will be under pressure in the medium term. At present, many central banks have joined the hawkish camp. First, the Fed stated that it would start reducing bond purchases as soon as November, paving the way for interest rate hikes next year as early as next year. Then the Bank of England said that the rationale for raising interest rates has been strengthened. The two committee members called for the end of bond purchases as soon as possible. The Norges Bank has raised interest rates by 25 basis points and is expected to act again in December.


UBS wrote in a report: "We expect more outflows from ETF and gold futures markets." The agency also said that they expect the price of gold to fall back to $1,600 by mid-2022. UBS believes that although the Fed has fully communicated on the reduction of bond purchases, once the reduction begins at the end of this year or early next year, U.S. Treasury yields will tend to rise, and the 10-year U.S. Treasury yields may reach by mid-2022. 2%. From a historical point of view, the rise in US real interest rates is very conducive to the overall strength of the US dollar.


Since the Fed stated in December last year that it needed to see “substantial further progress” in the job market before it began to reduce debt purchases, it has added 487,000 jobs every month on average. The United States needs to add about 365,000 jobs in September to see the half of the jobs that were still "missing" when the Fed adopted this phrase; some officials mentioned this indicator as a sign of their "substantial" progress.


SPDR Gold Trust, the world's largest gold-listed trading fund, on Thursday dropped from 1,000.79 tons on Wednesday to 992.65 tons, a drop of 0.8%.


Risk Warning: The above content is for reference only, and does not represent JRFX’s position. JRFX does not assume any form of loss caused by any trading carried out in accordance with this article. Please consult your financial planner for your investment portfolios and manage your own risk.


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