Gold gains amid weaker stock and bond yields
Gold extended its gains for the second straight session, fueled by weakening stock markets and a drop in bond yields. Ten-year U.S. Treasury yields fell to 4.012%, a drop of 3 basis points, making non-yielding assets like gold more attractive to investors. With U.S. retail sales, industrial production and weekly unemployment benefits data due Thursday, market participants are waiting for clearer signals on the Federal Reserve’s interest rate path.
UBS analyst Giovanni Staunovo highlighted that gold’s current momentum is driven by risky sentiment in the market, with stocks under pressure. Meanwhile, ANZ’s Soni Kumari highlighted the uncertainty surrounding the US election and ongoing geopolitical risks, which further increases gold’s appeal as a safe haven.
The Fed’s interest rate outlook continues to determine the price of gold
Comments from Federal Reserve officials were mixed this week, raising expectations about the central bank’s upcoming policy decisions. San Francisco Fed President Mary Daly suggested further rate cuts were still on the table, depending on upcoming economic data. Conversely, Fed Governor Christopher Waller advocated a cautious approach to rate cuts.
The bond market continues to respond to these divergent signals, with two-year US Treasury yields also down 3 basis points to 3.929%. A weaker bond market tends to boost gold, because lower yields lower the opportunity cost of holding non-interest-bearing assets like gold bullion.
The gold price is expected to reach $2941 within 12 months
With growing demand for safe-haven assets, analysts predict higher gold prices in the near term. The latest research from the London Bullion Market Association shows that gold prices could rise to $2,941 within the next 12 months, supported by an expected continuation of lower interest rates and geopolitical concerns.
In the near term, market participants expect stronger-than-expected US economic data to strengthen the case for a delayed rate cut, potentially driving investment flows into gold. The current environment favors a bullish outlook for the gold price, with further record levels likely as global uncertainty continues.