Global gold prices took a significant dip during Thursday’s trading session (August 22), failing to hold the key $2,500 per ounce mark, as investors cashed in profits and the dollar strengthened ahead of a speech by the Chairman of the Federal Reserve, Jerome Powell.
Analysts suggest that gold prices could face some obstacles before the Fed actually starts cutting interest rates, but the long-term outlook for the precious metal remains bullish.
At the close of trading in New York, gold for immediate delivery fell by $17.80 per ounce from the previous session’s close, equivalent to a 0.71% decrease, to $2,494.70 per ounce, according to data from the Kitco exchange.
At around 8 a.m. Vietnam time on Friday, the price of immediate gold in the Asian market rose by $5.40 per ounce compared to the previous session’s close, equivalent to a 0.22% increase, trading at $2,491.10 per ounce. When converted according to Vietcombank’s selling exchange rate, this price is equivalent to nearly VND 75.4 million per tael, a decrease of VND 600,000 per tael compared to Thursday morning.
The December gold price on the COMEX floor closed Thursday at a decrease of $30.80 per ounce, or 1.2%, to $2,516.70 per ounce. This was the lowest closing price for gold in over a week and the most significant relative decrease since July 25, according to data from Dow Jones Market Data.
On Tuesday, gold futures reached an all-time high of $2,550.60 per ounce, marking the 30th record close this year. Spot gold also hit a historical peak at $2,531.60 per ounce.
Thursday’s gold price decrease occurred as many investors took profits after gold reached record highs earlier in the week, and as the US dollar and US Treasury bond yields rose.
The Dollar Index, which measures the strength of the greenback against six other major currencies, rose by 0.5%, moving away from a 13-month low and closing at 101.51. Yields on 10-year US Treasury bonds increased by nearly nine basis points to 3.863%.
“The Dollar Index and US Treasury bond yields are both up. Gold prices had risen sharply in recent sessions and reached record highs, so it’s understandable that investors would cash in profits in this session,” said Phillip Streible, chief strategist at Blue Line Futures, in an interview with Reuters.
On Friday, Powell is expected to deliver a highly anticipated speech from Jackson Hole, Wyoming, as part of an annual central banking conference organized by the Fed. The event is attended by Fed officials and leaders of central banks from other major economies. Markets anticipate that the Fed Chairman’s upcoming speech will provide a clearer outlook on monetary policy for the remainder of 2024.
“In recent years, statements by central bank officials at Jackson Hole have caused market shifts,” said Jim Wyckoff, an analyst at Kitco.com, a precious metals market information and data website.
“If Powell expresses greater confidence in cutting interest rates in September, this soft signal could push gold prices up again,” said Han Tan, an analyst at Exinity Group.
Most investment banks on Wall Street predict that the Fed will cut interest rates by just 0.25 percentage points at the September meeting. However, three major banks, JPMorgan Chase, Citigroup, and Wells Fargo, forecast a 0.5 percentage point reduction.
According to Ole Hansen, chief strategist at Saxo Bank A/S, recent signs of weakness in the US labor market “reinforce the possibility of the Fed starting to cut interest rates in September.” Still, he believes gold prices may struggle to break through in the short term without additional catalysts.
“Perhaps gold needs the Fed to actually start a rate cut cycle before it can embark on a new upward trend,” the strategist said, adding that gold has strong technical support in the $2,475-2,480 per ounce range.
Looking long-term, most experts remain optimistic about gold’s prospects. UBS Global Wealth Management, a wealth management company, forecasts that gold prices could reach $2,700 per ounce by mid-2025.
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