At the beginning of trading in the new month of October 2023, gold futures contracts declined, driven by the rise in the US dollar and the increase in Treasury bond yields. According to recent trading, the price of the yellow metal is close to erasing all the gains it achieved this year, as it fell by 6% last month. The downward path for the price of gold, despite the recent losses, since the beginning of 2023 have increased by only 1%. At one point this year, the price of the yellow metal rose by more than 10%.
As for the price of silver, gold's sister commodity, it collapsed to $21 per ounce. In general, the price of the white metal declined by 4% last week and by 10% in September. From the beginning of 2023 until now, silver prices have decreased by about 12%.
In general, the biggest driver of the collapse in the metals market was the dollar and bonds. The US Dollar Index (DXY), which is a measure of the US currency against a basket of other major currencies, rose to 106.90. Overall, the US Dollar Index (DXY) rose by approximately 3% over the past month and has risen by more than 3% year to date. As is known, the rise in the value of the dollar is bad for goods priced in dollars because it makes it more expensive for foreign investors to buy them.
Another factor affecting the gold market.
Treasury bond yields rose, and according to performance, the yield on ten-year bonds rose 10.8 basis points to 4.679%. The two-year bond yield rose six basis points to 5.106%, while the 30-year bond yield rose 8.2 basis points to 4.791%. This has strengthened expectations that the Federal Reserve may raise US interest rates again and keep interest rates higher for a longer period than the US central bank expected. However, the futures market is still looking towards holding interest rates at the Federal Open Market Committee (FOMC) policy meetings in November and December.
The gold market is usually sensitive to interest rate fluctuations because it affects the opportunity cost of holding non-yielding bullion.
According to analysts, “There is a belief that US interest rates will be higher for a much longer period, which was the bearish element for precious metals markets.” Gold prices may fall below $1,800 in the near term. Trends in currency markets tend to be stronger and longer lasting. The US dollar's rise may not end anytime soon, putting pressure on the gold market.
As for other metal commodity prices, copper futures rose to $3.6425 per pound. Platinum futures fell to $886.50 an ounce. Palladium futures fell to $1,210.50 an ounce.
On a monthly basis, the MMI (Monthly Metals Index) saw almost no movement and trading remained narrowly flat. In fact, the index remained sideways, declining by only 0.11%. However, the Fed's stance on keeping US interest rates at a high level could impact precious metal prices in the near future.
Interestingly, prices for scrap precious metals (particularly gold) saw a slight increase at the beginning of August. Precious metal prices also started to rise starting on September 15, but eventually stabilized again. This was probably due to the upcoming Fed meetings. Once the Fed concluded its conferences, the price of both gold and silver on the COMEX fell again. However, both have remained close to support areas since the beginning of September, and both have the potential to reverse. Last month, gold market prices continued to show bearish signs and a lack of upward momentum. Earlier last month, gold prices started to break through support areas, indicating a continuation of the future downtrend. The market will need to see a bullish reversal with volume to determine buying strength.
Meanwhile, silver prices do not look as bearish as gold. Prices did not break through their support areas with much force. This, combined with the unclear market direction, does not show that bullish or bearish momentum is currently driving prices. Silver markets will need more price movement to show a clear trend.
Gold price forecast for XAU/USD today:
- According to the performance on the daily chart below, the price of XAU/USD is still bearish.
- There may be an opportunity to move towards the psychological support level of $1,800 per ounce if the strength of the US dollar continues and Treasury bond yields increase.
- The price of gold may remain bearish until the markets and the US dollar react to the announcement of US jobs numbers by the end of the week.
It must be noted that the recent losses have moved many technical indicators towards strong selling saturation levels. Gold investors may take advantage of the opportunity to seize buy deals. On the other hand, bulls will not regain control over the gold trend (XAU/USD) without moving towards the resistance level of $1885 per ounce again, which stimulates the top of $1900, the most important element for the bullish outlook.
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