0
0 News Ghana, Latest Updates and Breaking News of Ghana, Roger A. Agana, https://newsghana.com.gh/gold-declines-as-u-s-dollar-and-treasury-yields-rise-amid-interest-rate-concerns/
Gold resumed its downward trend on Monday after two days of recovery, hovering near the $2,615 per ounce level.
The renewed decline is attributed to the U.S. dollar and Treasury yields regaining strength following last Friday’s correction. The pressure on gold is largely driven by escalating concerns about the Federal Reserve’s slow pace of interest rate cuts next year.
These concerns have been a persistent theme since Donald Trump’s announcement of a second term as president, with his policies raising fears of a potential resurgence in inflation. These worries were further amplified last week following Jerome Powell’s cautious remarks on the prospects of future rate cuts after the Fed’s recent quarter-point reduction. Currently, futures are pricing in a lower probability—just 8.5%—of another quarter-point rate cut in January, according to the CME FedWatch Tool, which is also weighing on gold prices.
Despite these concerns, the U.S. economy continues to show resilience. Last week’s data revealed a 3.1% growth in GDP for the fourth quarter, beating expectations, while the service sector grew faster than anticipated. Additionally, better-than-expected figures for building permits and existing home sales indicate that the economy is adapting to higher rates.
While economic growth may exert further pressure on gold by diminishing the uncertainty caused by tighter monetary policies, geopolitical factors, particularly in the Middle East, are also playing a role. However, the geopolitical premium on gold may start to fade as tensions ease. The primary concern in the region has been the potential for mutual attacks between Iran and Israel, which could disrupt energy supplies.
Iran is currently facing a severe electricity generation crisis, despite having sufficient natural gas resources. Aging infrastructure is largely to blame, with The New York Times reporting that the crisis has already caused tens of billions of dollars in damage due to power outages disrupting economic activity. While direct attacks on infrastructure by Israel have not yet occurred, previous reports indicated the possibility of such strikes. This energy crisis could dissuade Iran from engaging in further confrontations, as the country faces escalating domestic pressures.
Additionally, Trump’s potential return to the White House may result in renewed economic sanctions on Iran, further weakening its economy and reducing its capacity for regional conflicts. Closing Iran’s access to the Syrian border could also increase economic pressure by cutting off one of its key markets and sanction evasion routes.
News Ghana, Latest Updates and Breaking News of Ghana, Roger A. Agana, https://newsghana.com.gh/gold-declines-as-u-s-dollar-and-treasury-yields-rise-amid-interest-rate-concerns/
