Gold prices fell to their lowest level since March on Thursday. Analysts said a stronger U.S. dollar and rising Treasury yields had contributed to the decline.
On Thursday afternoon, spot gold was down by nine percent, reaching $1,831.70 per ounce. Meanwhile, U.S. gold futures (GC00) concluded with a one percent drop, settling at $1,847.20. In September, gold prices saw a 5.1 percent decrease; for the third quarter, they experienced a 3.3 percent decline.
In March, the gold traded at a record low due to the regional banking crisis in the U.S., which began with the sudden shutdown of Silicon Valley Bank.
The commodity has been on a downward spiral since May, when it reached the $2,000-per-ounce level, declining by 11 percent. It is now potentially headed for a further decline as investors turn to the safe haven dollar.
Since gold is priced in U.S. dollars on most major exchanges, the strong dollar makes it more expensive for foreign investors to buy gold.
Meanwhile, if the Treasury yield climbs above five percent, gold’s value could drop below $1,800. On Monday, the 10-year Treasury yield stood at 4.67 percent, up from 4.572 percent on Friday, following the U.S. government’s avoidance of a shutdown over the weekend.
The fall in gold prices has led to a big sell-off in gold mining stocks, including Barrick Gold (GOLD), a prominent player in the gold and silver mining industry. Barrick’s shares dropped 7.9 percent last week and another 2.2 percent on Monday with higher-than-average trading.
GOLD shares are down 31 percent from their highest point in the past year and more than 55 percent from their peak in 2020. It is worth noting that Barrick Gold has also fallen by over 75 percent from its highest price in September 2011.
Approaching ‘death cross’
Gold prices are approaching a “death cross,” a technical signal suggesting a bearish trend, which happens when a short-term moving average drops below a longer-term one. Meanwhile, OANDA senior market analyst Edward Moya said gold is in a “danger zone.”
However, Kuptsikevich from FxPro said gold had been sold excessively, which could lead to a rebound. Last week, gold’s decline accelerated as it broke through the support of the downtrend channel it had followed in recent months. This could mean the drop might be coming to a close soon.
Nevertheless, Kuptsikevich suggests joining the upward movement later rather than buying in prematurely.
On Monday, gold futures for December had a 50-day moving average of $1,948.34. Meanwhile, according to FactSet data, their 200-day moving average was $1,982.13.
Gold’s performance since the beginning of the year has been relatively modest compared to the 11.7 percent increase in the S&P 500 during the same period.
Impact on other precious metals
As the precious metal’s price dipped, spot silver also slid 4.2 percent to a six-month low of $21.23 per ounce. The value of silver had decreased by 10 percent throughout September. Since the start of 2023 up to this point, silver prices have declined roughly 12 percent.
Meanwhile, platinum and palladium declined 2.8 percent to $879.42 and 3.1 percent to $1,207.51, respectively.
“That’s a significantly bearish outside-market development for the metals markets,” said Jim Wyckoff, senior analyst at Kitco.com. “Rising U.S. Treasury yields this week are also a negative for the precious metals.”
In contrast to other metals, copper futures rose to $3.6425 per pound, as Chinese inflation data showed some signs of improvement over the weekend. This figure shows that copper is rebounding from a more than three-week low.