Ritika Janiya
On November 1, 2024, gold prices took a little dip, much like a roller coaster that just can’t seem to decide if it wants to go up or down. This time, the precious metal was influenced by two important factors: the strength of the U.S. dollar and the yield of U.S. Treasury bonds. These two economic elements had traders feeling a bit jittery, causing them to rethink their bets on gold.
The Golden Roller Coaster
Gold prices fell slightly, landing at $2,736.28 per ounce. This was a decrease of 0.2% by 1:55 PM ET (which is 5:55 PM GMT). Just the day before, gold had reached a whopping record high of $2,790.15! This surge excited many traders, but some decided to cash in on their profits, leading to the price drop. Think of it as when everyone at the carnival tries to get off the Ferris wheel at the same time; things get a bit chaotic!
Despite the dip, U.S. gold futures—the contracts for buying gold at a set price in the future—remained pretty steady, ending at $2,749.20. It’s like having a game plan ready even when things don’t go your way.
Job Reports: The Unexpected Twist
One major reason for this change in gold prices was the latest job report from the U.S. The report showed that only 12,000 jobs were added last month. That’s the smallest increase since December 2020! This was partly due to hurricanes and strikes affecting workers in aerospace factories. When job growth slows down, it often makes people nervous, and they look for safer investments like gold.
The slow job growth led many analysts to believe that the Federal Reserve, the U.S. central bank, might lower interest rates. Lower interest rates usually make gold more attractive to investors. Bob Haberkorn, a senior market strategist at RJO Futures, pointed out that with a weak job report, there’s a chance of a rate cut. This means that the Fed might try to stimulate the economy by making borrowing cheaper.
The Dollar Dilemma
While gold prices were fluctuating, the U.S. dollar was gaining strength. The dollar rose by 0.4% after initially falling. A stronger dollar can make gold more expensive for investors using other currencies, which can lead to lower demand for gold. Additionally, the yield on 10-year U.S. Treasury bonds also went up, making them more appealing to investors compared to gold, which doesn’t pay interest.
So, when interest rates on bonds rise, gold often takes a backseat. Investors prefer to earn interest rather than hold a non-yielding asset like gold. It’s like choosing to save your allowance in a piggy bank that earns interest instead of just hiding it under your mattress!
Political Uncertainty and Economic Risks
Looking ahead, there’s a lot of uncertainty with the upcoming U.S. presidential election. Polls suggest a close race between Donald Trump and Kamala Harris. This political uncertainty can lead people to invest in gold, as it’s often seen as a safe haven during tumultuous times. Gold is like that reliable friend who always supports you during tough situations!
Moreover, there are ongoing discussions about potential conflicts, like the threat of an Iranian retaliatory strike on Israel. These global tensions can make investors nervous and push them toward gold.
Gold’s Bright Future?
Despite the recent price dip, many experts believe that gold remains a wise investment. In a low-interest-rate environment, gold shines even brighter. Economists currently see a 100% chance that the Federal Reserve will lower rates by 25 basis points, up from a 91% chance before the job data was released. Lower interest rates generally boost demand for gold because they make it less expensive to hold.
In addition to the U.S. job report and political events, gold prices are also affected by demand in different parts of the world. In Asia, for instance, high gold prices have started to impact how much physical gold people want to buy. When prices are high, some buyers may hold off on purchases until they drop. This is similar to how you might wait for your favorite toy to go on sale before buying it.
Other Precious Metals in the Mix
While gold was wobbling, other metals were also experiencing their own ups and downs. Spot silver, for instance, dropped by 0.7%, settling at $32.42 per ounce. On the flip side, platinum saw a slight increase of 0.3%, ending at $990.45, while palladium decreased by 0.4%, landing at $1,101.25. It’s a busy marketplace where every metal has its own story to tell.
