Gold plunge to March lows as Fed hike bets mount

October 03, 2023 (MLN): International spot gold continued its downward trajectory on Tuesday, hitting its lowest level since March 2023, amid expectations that the Federal Reserve will keep rates higher for longer, with U.S. job openings data due later in the day.

International spot gold is currently trading at $1,819.04, down by 0.48% compared to the previous close.

To note, gold has lost nearly 6% of its value in just the last seven trading sessions, marking its longest losing streak since August 2022.

The dollar scaled a fresh 10-month peak, while Treasury yields hit new 16-year highs after data on Monday showed U.S. manufacturing took a step further towards recovery in September, as Reuters reported.

A stronger greenback and higher bond yields weigh on bullion, which is priced in dollars and bears no interest.

“Quite simply, everyone’s been surprised by the resilience of the U.S. economy, including policymakers,” said Kyle Rodda, financial market analyst at Capital.com.

Fed officials say monetary policy will need to stay restrictive for “some time” to bring inflation back down to its 2% target, but their unity around that phrase masks an ongoing debate over another possible rate hike this year.

Markets priced in a 45% chance of another 25-basis-point rate hike this year, but also expect a 42% possibility of some monetary policy easing in the first half of 2024, according to the CME FedWatch tool.

“A break below $1800 (per ounce) will be fairly eye-catching for traders,” Rodda said, adding “We have seen some buying support emerge there in the past.”

Traders now looked to the U.S. Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) report, expected at 07:00 pm PST.

Meanwhile international spot silver is currently trading at $20.99, down by 0.28% on the day.

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