Gold Prices Driven Lower as Dollar Advance Continues

• Dollar Pressure Results in Falling Gold Prices
• Yield Stabilization Helps Steady Market
• Oil Prices Continue to Level Out

In commodities news, gold prices have continued to move lower throughout this week. The main reason behind this appears to be the steadily increasing strength of the US Dollar forex market. The Dollar has seen sustained buying as uncertainty and a lack of confidence hit the markets in recent days. A spike in the Treasury yields this week also has not helped gold and other precious metal prices. Meanwhile, the price of oil, having rocketed higher early in the week has managed to level out as fears over supply shortages ease off.  

Rising Dollar Stifles Gold

Gold prices were trading close to 2-month lows early on Wednesday as the price suffers under the weight of a much stronger US Dollar that does not appear to be giving up ground any time soon. The precious metal fell to as low as $1735 during the day as the Greenback latched on to a host of factors to continue in its role as main safe-haven. Among these is a seven-month low consumer confidence number released in the US for September. 

These issues alongside many others have led the US Dollar Index, a measure of USD strength against a basket of key major currencies, to its highest point of the year with many key members of the Federal Reserve cautioning that more needs to be done to control inflation even as Chief Powell strikes a more hawkish tone. 

Steadying Yield Helps Prices Find Level Ground

Another factor that has had a big impact on gold prices this week as well as in other areas, is the 10-year treasury yield. This spiked earlier in the week and is one of the contributing factors behind the sell-off in equities having spooked the market.   

Increased yields, particularly when combined with a strong US Dollar, do not make for a good combination with precious metal prices. The lows in gold price were hit when the yield was still relatively volatile and trying to find a level. Now that it seems to have stabilized around the 1.5% mark having been higher, gold has managed to attract more buyers which has moved the price closer to $1750.

Oil Comes Back From Recent Highs

Another commodity that has very much been in the news this week is oil. Prices had been pushing higher and higher amid supply concerns with a fuel shortage ongoing in the UK and Europe. There was a general feeling that the market could see prices move above $80 per barrel before too long. These thoughts have faded for now though as oil prices go into today on the back of two straight negative days. 

While there has been some disruption in production, and some areas have experienced supply issues, the prevailing concern that has tempered prices, still seems to be around COVID-19 which, even now, is continuing to hamper the reopening of many economies.