NEW YORK — August gold futures touched $4,046.20 on Thursday, marking their lowest price since November. This decline caused gold prices to trade below their 200-day moving average for the first time since September 2023.
Gold prices declined 6.3% during the week ending Thursday. The commodity last traded at $4,111.10, representing a 0.5% daily decrease. Investors historically purchase gold during periods of market uncertainty as a potential hedge against inflation, although gold does not generate financial yield for its holders.
Citigroup identified the break below the 200-day moving average as a negative technical signal. The firm has maintained a cautious near-term market outlook for gold since March, citing rising energy costs resulting from the closure of the Strait of Hormuz. The firm stated, "Despite the negative near-term momentum, we expect gold price to eventually rebound when the Strait situation deescalates."
U.S. consumer inflation in May increased at its fastest rate in three years, primarily driven by rising prices for energy-related products. Iran's military conflict has continued for four months and has contributed to higher energy and consumer prices. Additionally, U.S. employment data for May exceeded forecasts.
JPMorgan reported that retail and institutional investors have reduced their positions in assets linked to expectations of U.S. dollar depreciation. This shift in investor sentiment was evidenced by reduced holdings in gold exchange-traded funds and weaker futures positioning, according to the firm. The firm attributed this change to concerns regarding government debt levels, inflation, and geopolitical risks.
The Federal Reserve is expected to maintain its benchmark lending rate between 3.50% and 3.75% at its upcoming policy meeting. Market pricing indicates a 67% probability of an interest rate increase by December. Kevin Warsh will chair his first policy meeting next week.