Gold Prices Drop 48 Dollars Depressed By Rising US Yields And Greenback

Gold bars at the Austrian Gold and Silver Separation Plant in Vienna, Austria (photo: doc. between)

JAKARTA – Entering trading in May this year, gold prices slipped at the end of trading Monday (Tuesday morning WIB), May 2. This price drop ended two consecutive days of gains. The decline was caused by the strengthening of the US dollar and rising US government bond yields.

Moreover, strong information emerged about the Federal Reserve which seems to be imposing a 50 basis or half percentage rate hike at its policy meeting Wednesday, May 4.

The most active gold contract for June delivery on the Comex division of the New York Exchange fell 48.10 dollars, or 2.52 percent, to close at 1,863.6 dollars an ounce, after touching a session low of 1,853.95 dollars, its lowest since the week ending February 11.

Gold futures jumped 20.4 dollars, or 1.08 percent, to 1,911.70 dollars on Friday April 29, after rising 2.6 dollars, or 0.14 percent, to 1,891.30 dollars on Thursday 28 April, and slumped 15 percent. 0.4 US dollars, or 0.81 percent, to 1,888.70 dollars on Wednesday 27 April.

Gold fell as the dollar, its main rival and the main beneficiary of rising US interest rates, surged along with bond yields led by the US 10-year US Treasury bond. The dollar index, which measures the greenback against a basket of six other major currencies, was up close to April's peak of 103.95, which marks a 25-month high.

The US dollar index has risen to near a 20-year high, driving the biggest daily percentage drop for gold on Monday May 2 since March 9.

The Federal Reserve will conclude its two monetary policy meetings on Wednesday May 4. Investors widely expect the central bank to raise its benchmark interest rate by 50 basis points.

Disappointing economic data released on Monday May 2 also failed to support gold to hold its price. The US S&P Global manufacturing purchasing managers' index (PMI) increased to 59.2 in April from 58.8 in March, the highest level since September 2021, but was down slightly from an initial reading of 59.7.

Meanwhile, the Institute for Supply Management's (ISM) manufacturing index came in at 55.4 percent, down 1.7 percentage points from March's reading of 57.1 percent.

Another precious metal, silver for July delivery fell 50.1 cents, or 2.17 percent, to close at 22.584 dollars per ounce. Platinum for July delivery fell 6.8 dollars, or 0.72 percent, to close at 932.8 dollars an ounce.