Gold prices have dropped down into the $3,300/oz. This is an alarming sign for investors as the precious metal falls for a third straight day. On Monday, gold hit a one-week low, further showcasing the increasing pressure on the market.
Moreover, gold prices have fallen sharply recently, with little reason for a rebound. This decline follows the United States’ stronger-than-expected jobs report, which has shocked higher expectations for immediate rate cuts from the Federal Reserve. In response to these cuts, investors assumed that low rates would rally non-yielding assets like gold. The Fed’s thinking has been upended by a string of positive labor market data.
Market analysts point out the bright jobs report was the biggest blow to gold’s attractiveness. That’s because gold is a non-yielding asset. It’s an asset that usually does well in a low interest rate environment as this lowers the opportunity cost of holding it. Conversely, with the expectation of higher or increasing interest rates, gold finds it difficult to gain new buyers.
Gold is now trading at these levels for the first time in more than a week. This abrupt shift has traders on high alert with respect to its short-term prospects. With prices never being the same day-to-day, we’re seeing the volatile nature of the market in action. Here’s why macroeconomic indicators are significantly impacting precious metals.
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