Gold futures experienced a decline in early trading on Tuesday, as they felt the pressure from a stronger U.S. dollar and rising bond yields. This downward trend was in response to downbeat economic data from both China and Europe.
- Gold for December delivery (GC00, -0.59% GCZ23, -0.59%) fell by $11.20, or 0.6%, to reach $1,955.20 per ounce on Comex.
- December silver (SIZ23, -2.92%) dropped by 68.2 cents, or 2.8%, to settle at $23.88 per ounce.
U.S. markets were closed on Monday due to the Labor Day holiday. The previous week had seen both gold and silver rise by around 1.4%, as the fall in Treasury yields reduced the opportunity cost of holding non-yielding assets. However, the commodities faced pressure on Tuesday from a strengthening dollar, which made them more expensive for users of other currencies.
The dollar gained strength after the release of gloomy economic data. A Caixin survey revealed that China’s services sector had expanded in August at its slowest pace in eight months, raising concerns about the country’s post-pandemic recovery.
Simultaneously, a eurozone survey indicated that output in the bloc was contracting at its fastest pace in nearly three years.
The ICE U.S. Dollar Index (DXY), which measures the currency against a basket of six major rivals, recorded a 0.5% increase, reaching a six-month high.
Lukman Otunuga, senior market analyst at FXTM, stated that gold “seems to be searching for a fresh fundamental catalyst to trigger its next significant move.” He also noted that the precious metal is showing signs of exhaustion on the daily charts, with weakness below the 50-day SMA (simple moving average) potentially leading it back towards $1920. However, if the $1935 level proves to be reliable support, prices could retest the 100-day SMA around $1953.