Gold prices fell for the sixth consecutive session on Wednesday (Oct 9) as the US dollar and Treasury bond yields continued to strengthen, with markets no longer betting on a significant rate cut in the November meeting of the Federal Reserve. A forecast suggested that gold prices could dip to the $2,500/oz range in the coming months but are expected to remain elevated through 2025.
At the close of trading in New York, spot gold fell by $13.5/oz compared to the previous session’s close, equivalent to a drop of over 0.5%, to $2,608.7/oz, according to data from the Kitco exchange.
As of 8 a.m. Vietnam time on Thursday (Oct 10), spot gold prices in the Asian market rose by $1.4/oz compared to the US close, equivalent to a 0.05% increase, trading at $2,610.1/oz. Converted at Vietcombank’s selling exchange rate, this price is equivalent to about VND 78.7 million/troy ounce, down VND 400,000/troy ounce from yesterday morning.
Earlier this morning, Vietcombank quoted the dollar at VND 24,630 (buying) and VND 25,020 (selling), down VND 5 at both ends compared to yesterday morning.
Gold, an asset priced in US dollars and bearing no interest, fell under pressure from the strengthening greenback and rising Treasury yields.
The Dollar Index, measuring the greenback’s strength against a basket of six major currencies, closed at 102.93, the highest in nearly two months. Over the past five sessions, the index has gained 0.84%, according to data from MarketWatch.
Yields on 10-year Treasury bonds continued to climb after surpassing the 4% threshold for the first time in two months earlier this week. At the close, the yield on the 10-year note rose 3.8 basis points to 4.073%. The yield on the two-year note rose 4.3 basis points to 4.022%.
These moves came as markets this week stopped betting on a 50-basis-point rate cut by the Fed in the November meeting.
Minutes from the Fed’s Sept. 18 meeting, released on Oct. 9, showed that “a substantial majority of participants” supported a 50-basis-point rate cut at that meeting. However, the minutes also indicated that the Fed did not plan to pre-commit to a rate-cut path.
In the futures market, speculators are now betting on an over 80% chance of a Fed rate cut in November, with a 25-basis-point reduction. The probability of the Fed keeping rates unchanged at this meeting is nearly 20%, up from 12.5% the previous day, according to data from the FedWatch Tool of the CME exchange.
“The dollar continued to strengthen, and economic data supported a 25-basis-point rate cut more,” said Phillip Streible, chief strategist at Blue Line Futures, in an interview with Reuters.
However, according to Carlo Alberto De Casa of Kinesis Money, the downward trend in interest rates and ongoing geopolitical tensions mean that gold prices will remain supported in the long run.
In a report, Oxford Economics researcher Diego Cacciapuoti shared a similar view. He argued that gold’s upward momentum is weakening, but strong fundamentals will keep prices elevated through 2025 and beyond.
The report predicts a short-term correction in gold prices “because the recent rally has been largely supported by falling real yields… Since April – after real yields peaked – falling real yields have supported gold prices.” Recently, as real yields have turned higher again, coupled with central banks’ net gold purchases slowing down, gold has come under pressure.
Mr. Cacciapuoti forecast that in this context, many investors could sell gold to take profits. “Speculative positions in gold are at their highest since the Covid-19 pandemic and have been rising very slowly lately. This suggests that speculators may be finding gold less attractive,” he wrote, adding that between now and January 2025, gold prices could fall and consolidate around $2,500/oz.
However, the expert also believes that gold prices will rebound and remain high in 2025 as the fundamental factors remain largely favorable for the precious metal.
