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Gold faces investor gravity: What goes up must come down

Gold experienced a downward spiral on Monday, adhering to the age-old adage that what goes up must come down. The precious metal’s prices plummeted from record highs during Monday’s global session in Asia, driven by a stronger dollar and increased US treasury yields as the day progressed.

Comex gold for February delivery witnessed a decline of $47.50, settling at $2,042.20 per ounce. Meanwhile, December gold concluded at $2,023 an ounce, marking a $47.30 decrease.

Early in the Sydney morning at around 7 am, the continuous price on Comex managed to reach $2,047 an ounce, experiencing a 2% drop throughout a session that had earlier seen futures prices touch record levels, ranging from $2,150 to $2,152 an ounce.

Saxo Bank, in a note on Monday, pointed out that gold prices had surged due to a dovish repricing of the Fed, with Powell’s resistance to rate cut expectations remaining relatively modest. This stance was expected to support an extension into 2024. However, this bullish analysis came to a halt as the European and US trading sessions witnessed the US dollar gaining strength, accompanied by rising US bond yields.

At 7 am, the ICE US dollar index had increased by 0.44 points, reaching 103.72, and the Aussie dollar had dipped to approximately 66.14 US cents.

Simultaneously, US Treasury bond yields saw an uptick, raising the cost of owning gold. The US two-year note surged by 11 basis points to 4.65%, while the 10-year note was last seen yielding 4.29%, an increase of 8.9 basis points.

Early on Tuesday, the yield on the Aussie 10-year bond was around 4.46%, marking an increase of approximately 4 points.

In addition, global oil prices experienced a decline, despite Saudi Arabia discussing the possibility of extending production cuts beyond the first quarter. US West Texas Intermediate crude fell to $73.15 at 7 am in Sydney, marking a 1.2% decrease, while Brent, the global benchmark, ended at around $78.03, down nearly 1%.

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