Currently, gold is hovering around the $2,728 level, stabilizing as political and economic uncertainties temper further losses.
U.S. Treasury Yields and Dollar Strength Impact Gold
The U.S. dollar continues to strengthen, bolstered by rising Treasury bond yields, which hit their highest levels in three months. This dynamic led to Wednesday’s profit-taking in gold, despite ongoing political uncertainty ahead of the U.S. presidential election on November 5.
The dip in gold prices comes as traders reassess the likelihood of smaller interest rate cuts by the Federal Reserve.
According to the CME Group’s FedWatch Tool, traders estimate a 90% chance of a 25-basis-point rate cut by the Fed in November. Higher yields generally reduce the appeal of gold, as investors flock to income-generating assets like bonds.
As a result, gold is under pressure, with a strong dollar adding to the metal’s challenges.
Geopolitical and Economic Uncertainty Offer Support
Despite the headwinds, gold remains supported by geopolitical tensions and economic uncertainty. The upcoming U.S. election is raising concerns over future inflation and fiscal deficits, especially with potential tariff increases under different administrations.