On August 22, the price of gold took a significant hit, shedding over $40 per ounce as investors moved to lock in profits ahead of a crucial central bank meeting.
By the close of trading, the spot price of gold had fallen by $27, settling at $2,484 per ounce. At one point during the session, the price dipped even lower to $2,470 per ounce. This drop comes just two days after the precious metal hit a new high of $2,531 per ounce.
The market’s downturn was largely driven by investor sell-offs, as they sought to secure gains before the upcoming global central bank leaders‘ conference, organized by the U.S. Federal Reserve in Jackson Hole, Wyoming, which kicks off today. Fed Chairman Jerome Powell is set to deliver a keynote address on the morning of August 23, where he might reveal the extent of the anticipated interest rate cuts for September.
Most investors are betting on the Fed easing monetary policy at the next meeting. The key debate now centers on whether the rate cut will be 25 basis points (0.25%) or 50 basis points. Minutes from the Fed’s July meeting, released earlier this week, also indicated that the central bank is prepared to take action.
The strengthening U.S. dollar and rising U.S. government bond yields yesterday also put pressure on gold prices. A stronger dollar makes gold more expensive for buyers outside the U.S., while the 10-year U.S. Treasury yield climbed by 0.1%, making non-interest-bearing assets like gold less appealing.
From a technical perspective, analysts at Kitco suggest that gold prices could continue their upward trend in the short term. The current resistance level for the precious metal is $2,550, while the support level is $2,450.
U.S. stocks also saw declines yesterday, pressured by rising bond yields and a slump in tech stocks. The S&P 500 fell by 0.9%, the DJIA dropped by 0.43%, and the Nasdaq Composite lost 1.67%. During the session, all three indices had moments of gains, only to reverse course and end the day lower. Overall, Wall Street has been largely flat since the start of the week.
