Gold prices decline amid strong dollar

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KUWAIT CITY, June 2: Today marked the second consecutive decline in gold prices, attributed to a surge in the dollar and US Treasury bond yields, reports Al-Jarida daily. Investors keenly await key inflation data, which could shed light on the Federal Reserve’s stance regarding interest rates. Spot gold dipped by 0.6 percent to $2,325.73 per ounce following a 1 percent drop the previous day, while US gold futures also slipped by 0.8 percent to $2,323.40. The strengthening dollar, up by 0.5 percent, diminished the appeal of gold for holders of alternative currencies.

Tim Waterer, chief market analyst at KCM Trade, remarked on investors’ recognition of the prolonged high-interest rate environment, shifting focus back to US bond yields and the dollar, consequently dampening gold’s allure this week. Gold has retraced over $100 since hitting $2,449.89 earlier this month, prompted by hawkish remarks from Federal Reserve officials and minutes from its recent meeting indicating a longer timeline for inflation to meet the 2 percent target, potentially delaying interest rate cuts. While gold typically serves as a hedge against inflation, rising interest rates elevate the opportunity cost of holding the nonyielding metal. Yesterday’s agenda includes the release of data on personal consumption expenditures in the United States, the Federal Reserve’s favored inflation gauge.

Meanwhile, other precious metals experienced declines in spot transactions, with silver dropping by 1.8 percent to $31.38, platinum decreasing by 0.8 percent to $1,025.24, and palladium sliding by 2.5 percent to $941.13. Goldman Sachs anticipates record-high prices for gold and copper this year, fueled by heightened demand in sectors such as artificial intelligence and defense industries amidst geopolitical tensions.

The bank forecasts copper prices surpassing $12,000 per ton and gold reaching $2,700 by the end of 2024, citing a convergence of technological, geopolitical, and economic factors that will bolster demand for metals including copper, aluminum, lithium, cobalt, and nickel. Limited investment in new commodity production capacity since the mid-2020s due to weak returns and elevated capital costs linked to environmental, social, and governance considerations further bolsters Goldman Sachs’ outlook for the commodity market.

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