WHAT YOU NEED TO KNOW
  • Gold fell 2.78% to around $4,165.00, while silver dropped 4.49% to near $61.290.
  • Oil rebounded as the Strait of Hormuz stalemate intensified inflation concerns and supported expectations for another Federal Reserve rate increase.
  • Traders placed the chance of an October rate increase at roughly 68% to 70% as Treasury yields and the dollar strengthened.
  • U.S. labor, inflation and manufacturing reports will test whether gold’s break below $4,200 went too far.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Spot gold and silver prices fell sharply during early U.S. trading Monday as rebounding oil prices strengthened inflation concerns and reinforced expectations for another Federal Reserve rate increase. Gold traded near $4,165.00 an ounce, down 2.78% during the session.

Silver suffered an even steeper decline, trading near $61.290 and falling 4.49%. The pressure reflected a market increasingly focused on rising energy costs, firmer Treasury yields and renewed strength in the U.S. dollar.

Market positioning shifted toward expectations that U.S. interest rates will remain elevated for longer. Stronger activity data, firm inflation expectations and renewed pressure from energy prices pushed the policy sensitive portions of the Treasury curve higher.

Traders placed the probability of another Federal Reserve rate increase in October at roughly 68% to 70%. The dollar index traded near the 101 area, while the benchmark 10 year Treasury yield hovered near 5.2%.

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The Strait of Hormuz and the confrontation between the United States and Iran moved back to the center of trading across asset classes. President Donald Trump rejected Iran’s proposal to reopen the strait and end the fighting, leaving negotiations at a stalemate.

Additional discussions are expected this week. In the meantime, Brent crude rebounded more than 3% to around $108.30 a barrel, while Nymex WTI crude traded near $95.93.

The renewed advance in oil fed inflation concerns and supported expectations for tighter Federal Reserve policy. Gold faced conflicting forces because geopolitical risk supported defensive demand, while rising yields and a firmer dollar increased the opportunity cost of holding bullion that produces no income.

Risk appetite weakened before the U.S. market open. S&P 500 futures declined 0.5%, while Nasdaq futures dropped 1.0% as higher oil prices and yields pressured growth and technology shares.

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European equities moved in the opposite direction, with the Stoxx 600 rising 0.1% on strength in oil and gas companies. Chinese blue chip shares slid 1.9% overnight and reached a one year low.

Treasury markets added to the pressure on precious metals. The 2 year Treasury yield increased by about 5 basis points to 4.914%, while the 30 year yield held near 5.52% after reaching its highest level since 2004 last week.

Markets now face a packed schedule of U.S. economic releases. JOLTS job openings are due Tuesday at 10:00 a.m. ET, followed Wednesday by ADP private payroll figures and August PCE inflation data.

ISM manufacturing figures arrive Thursday, and the September nonfarm payrolls report follows Friday. Stronger inflation or labor market readings would maintain upward pressure on yields and the dollar, creating another obstacle for gold.

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Softer reports would test whether Monday’s decline below $4,200 went too far. Until those figures arrive, movements in oil, Treasury yields and the dollar remain central to the short term direction of precious metals.

Technically, gold bulls need to push prices back above the resistance zone between $4,199.00 and $4,223.90. A sustained move through that area would target $4,244.00, followed by $4,257.00.

Gold bears are targeting a break below $4,162.69. Deeper downside objectives stand at $4,152.00 and $4,128.00, while initial resistance remains at $4,199.00 and $4,223.90.

Silver bulls face resistance between $62.350 and $63.150. A move above that zone would bring $64.080 and then $64.820 into focus, while the bears are targeting a break below $60.890.

Further silver weakness would expose $60.830 and then the $60.000 area. With oil rebounding, yields elevated and the dollar firming, both metals remained under heavy pressure despite continued geopolitical uncertainty surrounding the Strait of Hormuz.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.