Gold Falls to Six-Week Low as Fed Hike Probability Nears 90 Percent
Front-month Comex gold settled at $4,291.60 per ounce on Tuesday, marking a six-week low. The decline occurred as markets priced in a high likelihood of a Federal Reserve rate increase.
Spot gold and silver prices closed lower in late-afternoon U.S. trading. Front-month Comex gold settled at $4,291.60 an ounce. This represented a 0.43 percent drop. Front-month silver settled at $63.236 an ounce. This represented a 0.4 percent decline. The moves reflected pressure from a stronger U.S. dollar and rising Treasury yields.
The 10-year Treasury yield ended near 5.00 percent. It briefly touched 5.04 percent overnight. Futures markets are pricing a roughly 90 percent probability of a 25-basis-point rate hike. This is a sharp shift from one week ago. The expected move is largely discounted by traders. Attention now turns to the Federal Reserve’s guidance on future policy.
Equity markets decline alongside metals
North American stock markets closed lower as oil prices and yields weighed on sentiment. The S&P 500 fell 34.25 points, or 0.4 percent, to 7,585.73. The Dow Jones Industrial Average dropped 328.09 points, or 0.6 percent, to 52,093.11. The Nasdaq Composite lost 204.84 points, or 0.8 percent, to 25,981.57. European indices also finished in the red, with the STOXX Europe 600 down 0.28 percent.
Oil shock complicates inflation outlook
Brent crude settled at $108.75 a barrel. WTI traded above $106 intraday. Disruptions in the Strait of Hormuz and the Saudi East-West Pipeline have tightened supply. Commodity-vessel traffic through Hormuz fell to four on Monday. This is down from 10 the previous day. Higher crude prices raise inflation expectations and support the case for a rate hike.
The geopolitical situation provides background support for defensive demand. However, the stronger dollar and 5 percent Treasury yield cap rallies. The conflict between defensive buying and rising real yields creates a conflicted setup for gold. Silver remains vulnerable while trading below its $64.51 resistance level. The market awaits the Federal Reserve’s statement and updated rate projections.
Technical levels define near-term path
Gold bulls must push prices back above the $4,316.00 resistance level. A sustained move targets $4,355.00 and then $4,402.00. Bears target a break below $4,283.00. Deeper downside targets are $4,252.00 and $4,223.00. Silver bulls need to reclaim $63.76 to target $64.51. Bears look for a break below $62.34. According to GN auto markets/commodities: silver prices, these levels are critical for the next move.
