The recent rally in gold has encountered resistance due to the resurgence of the U.S. dollar. The greenback rebounded on Thursday, recovering all its recent losses from the previous three sessions.
Despite Federal Reserve officials’ reluctance to implement further interest rate hikes and Wall Street’s attempts to downplay ongoing inflation, the U.S. dollar regained its strength, causing a pause in gold’s four-day rally. The yellow metal reached a new two-week high, nearly hitting $1,900 per ounce before retreating.
The most-active gold futures contract on the New York Comex, December, settled down $4.30, or 0.2%, at $1,883 per ounce, after briefly surging to $1,897.90—an achievement not seen since September 27 when it was still above $1,900.
The spot price of gold, which is closely monitored by some traders, stood at $1,869.65 by 14:30 ET (18:30 GMT), marking a decline of $4.71, or 0.3%, for the day. The session peak for spot gold reached $1,867.96, maintaining its typical $30 discount to futures.
The U.S. Dollar Index (DXY), which measures the greenback against a basket of six other currencies, traded just below the session high of 106.54, marking a 0.6% increase for the day. Prior to this, the DXY had been on a three-day downtrend after reaching an 11-month high of 107.35 a week ago.
The dollar managed to strengthen despite Federal Reserve officials expressing their reluctance to raise rates in November, even as U.S. inflation remained higher than expected for a third consecutive month. The Labor Department reported that consumer prices in September grew at an annual rate of 3.7%, matching August’s figure and exceeding the 3.6% forecast by Wall Street economists.
Ed Moya, an analyst at the online trading platform OANDA, explained, “Profit-taking in gold occurred after a strong inflation report reignited a bond market selloff. After the Consumer Price Index (CPI) report, gold traders quickly realized that the precious metal wouldn’t rally above the $1,900 level.”
The U.S. bond yields also contributed to the dollar’s resurgence, posting their largest single-day increase since July 27. The yields, benchmarked against the 10-year Treasury note, reached 4.708%, marking a 2.46% increase for the day. Prior to this, yields had mostly been on the decline, after reaching a 16-year high of 4.892% last week.