Gold is heading to record a weekly loss, affected by the continued rise in energy prices and the escalation of inflationary fears, which are factors that pushed US bond yields higher and strengthened expectations that the Federal Reserve may resort to continuing to raise interest rates. In Friday’s trading, the precious metal recorded a slight increase, approaching the level of $4,300 per ounce, but it remained down by about 2% compared to last week’s closing levels.
On the other hand, oil prices witnessed a decline after gains exceeding 7% during the previous two sessions, following reports indicating that negotiators were studying an interim agreement that might include Tehran opening the Strait of Hormuz again, in exchange for Washington lifting the blockade on the ports.
Gold prices have been under continuous pressure over the past weeks due to high energy costs and increasing expectations regarding the Federal Reserve’s monetary policy, as high borrowing costs usually pose a burden on gold as it is an asset that does not generate a return. These pressures have exacerbated with the widening of losses in the US Treasury bond market, amid market concerns about inflation resulting from the jump in oil prices, in addition to concerns regarding government debt levels.
US 30-year bond yields rose close to the 5.5% level, recording their highest peak in more than two decades, which prompted markets to increase their bets on yields remaining high for a longer period. In this context, Christopher Wong, an analyst at Oversea Chinese Banking, explained that the combination of high yields and oil prices with strong economic data creates a very difficult environment for gold. He added that the continued rise in yields portends more pressure on the metal, stressing at the same time that the basic factors supporting the long-term outlook for gold are still in place, despite the market’s need for a new catalyst to launch a new strong rising wave.
During the month of September, gold moved in a relatively narrow range near the $4,300 per ounce barrier, coinciding with traders repricing their expectations about the path of US interest rates. Despite short-term pressures, a large segment of investors are still betting on gold continuing its gradual rise, based on its historical role as a safe haven and a tool for diversifying investment portfolios.
In terms of trading, the price of gold in spot transactions rose by 0.5% to record $4,296.67 per ounce by 10:11 am London time. Silver also rose by 1.2% to $64.54 per ounce, but it is also heading to suffer a weekly loss exceeding 2%. In other precious metals, platinum rose and palladium stabilized, while the Bloomberg Dollar Spot Index recorded a decline of 0.2%, ending a series of gains that continued for five consecutive sessions.
