Gold climbs, looks to snap longest losing streak since 2017

For gold, “bears are clearly in the building and could dominate the scene further given the right fundamentals forces,” Lukman Otunuga, manager, market analysis, at FXTM, told MarketWatch.

Rising yields and a stronger dollar, driven by strong U.S. economic data that has reinforced expectations the Federal Reserve will keep rates “higher for longer,” are getting much of the blame for gold’s slide. Rising yields raise the opportunity cost of holding a nonyielding asset like gold, while a stronger dollar can be a negative for commodities priced in the unit by making them more expensive to users of other currencies.

“The recent renewed rise in U.S. yields dampens investor interest, among both the more short-term-oriented speculative financial investors and the ETF investors,” said Barbara Lambrecht, commodity analyst at Commerzbank, in a Friday note.

“In this environment, the physical demand in Asia can hardly do anything to help, and China’s gold imports are unlikely to move prices,” she said.

Attention will instead focus on next week’s U.S. monetary policy symposium in Jackson Hole, Wyoming, where Federal Reserve Chair Jerome Powell is expected to speak.

“This is a major event where central bankers and financial heavyweights come together to tackle pressing economic issues that impact the entire world,” said Otunuga. “When considering how such a gathering could provide investors with critical insights into the Fed’s stance on rates, gold may be in for a rollercoaster ride.”

If Powell is seen indicating another interest rate increase is likely, gold could fall “somewhat further still,” Commerzbank’s Lambrecht said, though Commerzbank expects that Powell won’t commit to a move.

Commerzbank contends U.S. policy interest rates have already peaked, which will set the stage for a recovery by gold “as soon as there are also clear signs that the market has acknowledged this,” she said.