HomeMarket NewsGold suffers biggest drop since August 1 as Fed flags higher-for-longer outlook

Gold suffers biggest drop since August 1 as Fed flags higher-for-longer outlook

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Gold prices falling in a bearish market. Red arrow going down over gold bullion bars. Concept digital 3D render.

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Gold futures experienced their largest drop in nearly two months on Thursday, abruptly ending a five-day winning streak. The plunge comes in response to the Federal Reserve’s recent announcement that it may continue to raise interest rates and is unlikely to cut rates in 2024 as previously anticipated by the market.

The strengthening of the dollar, which reached a six-month peak, along with a rise in benchmark 10-year Treasuries to a 16-year high of 4.48%, also contributed to the decline in gold prices. As gold is a non-interest-bearing asset, these developments negatively impacted its value.

The front-month Comex gold for September delivery closed down 1.3% at $1,919.20 per ounce, marking the largest one-day dollar and percentage decline since August 1. Similarly, September silver ended the day down 0.5% at $23.444 per ounce.

Precious metal exchange-traded funds (ETFs) that were affected by the decline in gold prices include NYSEARCA:GLD, NYSEARCA:GDX, GDXJ, IAU, NUGT, PHYS, GLDM, AAAU, SGOL, BAR, OUNZ, NYSEARCA:SLV, PSLV, SIVR, SIL, SILJ, and SLVP.

In addition to gold, other precious metals also experienced broad losses in Thursday’s trading. This includes declines in stocks such as IAG (-5.3%), PAAS (-4.5%), KGC (-4.4%), GFI (-4.1%), HMY (-3.7%), CDE (-3.6%), EGO (-3.4%), EXK (-3.4%), AG (-3.2%), MAG (-3.1%), WPM (-3%), NGD (-2.9%), SSRM (-2.9%), SVM (-2.8%), GOLD (-2.4%), FNV (-2.3%), AEM (-2.3%), and HL (-2.2%).

The negative momentum in gold prices resulting from the higher interest rate outlook has led to the liquidation of long positions. According to TD Securities commodities strategist Ryan McKay, there may be further pressure on gold prices as systematic funds transition to a net short position in the coming days.

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