Currently hovering around the $2,728 level, gold is stabilizing as political and economic uncertainties temper further losses.
US Treasury yields and the strength of the dollar impact gold
The US dollar continues to appreciate, supported by rising government bond yields, which reached a three-month high. This dynamic led to profit-taking in gold on Wednesday, despite continued political uncertainty ahead of the US presidential election on November 5.
The drop in gold prices comes as traders reassess the likelihood of smaller interest rate cuts from the Federal Reserve.
According to 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 gold’s appeal as investors flock to income-producing assets such as bonds.
As a result, gold is under pressure, while a strong dollar adds to the metal’s challenges.
Geopolitical and economic uncertainty provide support
Despite the headwinds, gold remains supported by geopolitical tensions and economic uncertainty. The upcoming US election raises concerns about future inflation and budget deficits, especially with potential tariff increases under various administrations.