Background on Key Figures and Context
The price of gold has been decreasing from its historical highs as investors take profits and the strength of the US dollar weighs on prices ahead of the Federal Reserve’s monetary policy decision later today.
Gold, the precious metal, is experiencing a 0.7% drop, falling to $3,663.93 per ounce by 3:05 a.m. CDMX time, after reaching an all-time high of $3,702.95 on Tuesday.
US gold futures for December delivery are also down by 0.7%, trading at $3,700.10.
The US dollar is rising by 0.2% after falling to its lowest in over two months on Tuesday, while the yield on 10-year US Treasury notes approaches its lowest in five months.
The Relative Strength Index (RSI) for gold is at 75, below the overbought maximum of 81 reached on Tuesday, indicating that gold is currently overvalued.
Retail Sales and Inflation Context
On Tuesday, US retail sales increased more than expected in August. However, labor market weakness and rising prices due to President Donald Trump’s tariffs pose downside risks to consumer spending strength.
The market anticipates that the Fed will cut interest rates by a quarter percentage point later in the day. Investors are closely watching statements from Fed Chair Jerome Powell for clues about the future path of interest rates.
Trump’s Influence on Gold Prices
President Trump has urged Powell to implement a “bigger” interest rate cut. Lower rates reduce the opportunity cost of holding non-yielding gold.
Deutsche Bank raised its 2026 gold price forecast to an average of $4,000 per ounce from the previous estimate of $3,700.
Gold Holdings and Other Precious Metals
SPDR Gold Trust, the world’s largest gold ETF, reported a 0.32% increase in its holdings to 979.95 metric tonnes on Tuesday, up from 976.80 tonnes on Monday.
Among other precious metals, silver is down 2.2% to $41.59 per ounce, platinum is off by 1.1% at $1,375.83, and palladium is down 3% at $1,139.0 per ounce.
Key Questions and Answers
- What is causing the drop in gold prices? Investors are taking profits, and the strength of the US dollar is weighing on gold prices ahead of the Federal Reserve’s interest rate decision.
- Who is Donald Trump, and why is he relevant in this context? Donald Trump is the President of the United States. He has urged Fed Chair Jerome Powell to implement a larger interest rate cut, which could impact gold prices.
- What are the recent trends in US retail sales and inflation? US retail sales increased more than expected in August, but labor market weakness and rising prices due to Trump’s tariffs pose downside risks to consumer spending strength.
- What is the current expectation for Fed interest rate cuts? The market anticipates that the Federal Reserve will cut interest rates by a quarter percentage point later in the day.
- How does lowering interest rates affect gold prices? Lower rates reduce the opportunity cost of holding non-yielding gold, making it more attractive to investors.
- What recent adjustments have been made to gold price forecasts? Deutsche Bank has raised its 2026 gold price forecast to an average of $4,000 per ounce from the previous estimate of $3,700.
