Gold prices turn green on Monday

Gold prices found stability trading in the $1980 range

By Raed Alkhedr | @raedalkhedr | 23 October 2023

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  • Gold prices reached their highest levels since mid-May on Friday

  • Markets focus on the consumer spending index data and the European Central Bank's decision.

  • Expectations of the Bank of Japan's intervention to prevent further decline of the yen is still on the table.

Gold rises again

Gold prices witnessed some stability at the start of the week after the strong gains recorded last week. Ahead of key US data which may impact gold prices this week.

Gold remained near the $1981 per ounce level, while gold futures declined by 0.1% to $1992 per ounce.

At the beginning of the week, the yields on the US ten-year Treasury bonds reached levels above 5%, which reduced the attractiveness of the yellow metal. As soon as the weekly trading opened, gold dropped from $1998 per ounce to $1964 before rising again and currently trading near $1981 per ounce.

Gold prices reached their highest levels since mid-May on Friday, rising about nine percent in the past two weeks as investors favored safe-haven assets amid escalating tensions between Israel and Palestine. During that time, gold experienced strong increases with the possibility of geopolitical tensions spreading throughout the entire Middle East region.

Holdings of the SPDR Gold Trust GLD, the largest gold-backed exchange-traded fund, rose by 1.77% to 863.24 tons on Friday.

Washington warned of a significant risk to US interests in the Middle East as Israel carried out airstrikes in Gaza and clashes escalated along its border with Lebanon.

Markets are eagerly awaiting consumer spending data, which is the Federal Reserve's preferred indicator for measuring inflation, US GDP data for the third quarter, the European Central Bank's decision, and finally, purchasing managers' data in key sectors.

Japanese bond yields reach their highest level in a decade.

Japanese bond yields rose to their highest levels in several years in the first sessions of the week as expectations grew regarding the Bank of Japan's intervention in the current monetary policy and control of the yield curve.

The benchmark yield for Japanese government bonds rose by two basis points to 0.855%, its highest level since July 2013.

The yield on 20-year Japanese government bonds rose to 1.665%, its highest level in a new decade, while the yield on 30-year Japanese government bonds increased by 3.5 basis points to 1.855%, its highest level since July 2013. In the short term, the yield on 2-year Japanese government bonds rose to 0.08%, its highest level since June 2014.

The Japanese yen has experienced significant declines recently due to the clear divergence in monetary policies compared to other central banks. While other central banks have accelerated interest rate hikes to control inflation, the Bank of Japan has maintained its expansionary monetary policy and negative interest rates. This has put pressure on the performance of the Japanese yen and leaves limited options for the Bank of Japan in the coming period.