Gold retreats, holds near a more than 2-year low as investors await Fed decision

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Gold futures declined on Monday, giving back most of what they gained in the previous session, to hold ground near their lowest price since 2020, while the yield on the 10-year Treasury note climbed to its highest level in more than a decade.

Price action
  • Gold futures
    GCZ22,
    -0.18%

    for December delivery fell $5.30, or 0.3%, to settle at $1,678.20 per ounce after gaining nearly 0.4% on Friday. Prices for the most-active contract had settled Thursday at $1,677.30, the lowest since April 2020, FactSet data show.

  • December silver
    SIZ22,
    +0.15%

    lost 2 cents, or 0.1%, to $19.358 per ounce.

  • December palladium
    PAZ22,
    +5.48%

    advanced $108, or 5.1%, to $2,220.70 per ounce, while platinum for October delivery
    PLV22,
    +2.12%

    advanced $17.50, or 1.9%, to $918.50 per ounce.

  • Copper futures
    HGZ22,
    -0.14%

    for December declined by a fraction of a cent, or 0.1%, to $3.5125 per pound.

What’s driving markets

Monday saw a relatively quiet session with no major economic data releases in the U.S., and no Federal Reserve officials set to speak publicly, since the central bank is still in its “blackout period” ahead of its policy meeting, which begins on Tuesday.

Edward Moya, senior market analyst at OANDA, said gold appears to have run out of downside momentum as the selloff over the past week has returned the yellow metal to its weakest level in two years.

Another catalyst, such as a hawkish Fed on Wednesday, would likely be needed for gold prices to continue to soften.

“The lead up to the FOMC meeting has been very bearish for gold. Gold is stabilizing here as selling pressure has exhausted itself and will likely need to wait for the FOMC decision,” Moya said.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.483%

was up 2.6 basis points at 3.4749% in recent trade, around its highest level in more than a decade. Rising yields can weigh on gold and other commodities, raising the opportunity cost of holding nonyielding assets.

Gold futures had marked their lowest finish since April 2020 on Thursday, pressured in part due to “continued hawkish money flows” and a stabilizing dollar, analysts at Sevens Report Research wrote in Monday’s newsletter.

The new lows for gold “have shifted our call on gold from neutral to bearish for the medium term,” they said. “That will remain the case until we reach peak hawkishness with Fed expectations resulting in a top in the dollar and interest rates, both nominal and real, beginning to decline.”

Until then, the Sevens Report analyst said they would “avoid precious metals and favor short-duration Treasur[ys] as a safe-haven destination for capital, as real yields are either positive or turning positive for the first time in years.”

Also on Monday, palladium futures were a standout, climbing by just over 5%.

In a note dated Friday, analysts at Citi upgraded their zero to three-month palladium price forecast to $2,300 an ounce, citing an “expected easing in chip supply and rising Russian supply.”

The note also pointed out that copper has bounced from its September lows. “The outlook for a potential European recession in combination with the recent China weakness has resulted in a decline in speculative positions, which saw the copper price decline, tightening the scrap market, and resulting in a bounce back in prices,” the Citi analysts said.

Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.



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