Gold prices rose slightly on Tuesday, buoyed by retreating U.S. Treasury yields, as investors awaited key economic data that could offer further clues about the Federal Reserve’s next moves on monetary policy. Spot gold climbed 0.4% to $2,662.50 per ounce, while U.S. gold futures gained 0.5% to $2,678.80. Despite hitting one-week highs in the previous session, analysts predict gold could see a period of consolidation.
Treasury Yields Slip, Supporting Gold
The slight increase in gold prices was driven by a pullback in yields on the benchmark 10-year Treasury note. A softer-than-expected reading of New York State’s manufacturing activity contributed to the drop in yields, making gold, which yields no interest, more attractive. Additionally, the U.S. dollar slipped 0.2%, further supporting gold’s appeal.
“We’re seeing a little pullback in yields as bond prices rally here. That’s offering a little stability, a little support to the gold market,” said David Meger, director of metals trading at High Ridge Futures.
Meger also noted that the gold market may experience a brief pause or consolidation in the near term but suggested a sideways to upward trend could develop as yields retreat further. “We’re going to see a little bit of a pullback in the dollar,” Meger added.
Market Focus on U.S. Economic Data and Fed Policy
Investors are keeping a close eye on upcoming U.S. retail sales, industrial production data, and weekly jobless claims for indications of the health of the economy and potential adjustments to the Federal Reserve’s monetary policy. Currently, traders see a 90% chance of a 25-basis-point rate cut in November, according to the CME FedWatch tool.
As gold tends to benefit during times of political and economic uncertainty, any signs of monetary easing from the Fed could continue to support the metal’s prices.
Commerzbank Sees Downside Risks for Gold
Despite the recent uptick, analysts at Commerzbank cautioned that gold could face slight downside risks. In a note, the bank forecasted that the gold price would drop to $2,600 per ounce by the end of the year, citing a potential decrease in geopolitical risks. If reports that Israel would refrain from targeting Iran’s oil and nuclear sites in any retaliatory action prove to be true, the geopolitical support currently buoying gold prices could fade.
“We see slight downside risks for the gold price and expect the gold price to be $2,600 at the end of the year,” Commerzbank said.
Precious Metals Roundup
In other metals, spot silver rose by 1.4% to $31.61 per ounce, supported by improving market sentiment. However, platinum fell 0.6% to $987.20, while palladium experienced a sharp drop of 1.9%, trading at $1,010.50 per ounce.