In the midst of economic turbulence, the gold price faces downward pressure as it hovers near $1,910 per troy ounce during the Asian session on Tuesday. The relentless strengthening of the US Dollar (USD), coupled with mounting concerns over the US political landscape, have cast a shadow on the precious metal’s prospects.
The US Dollar Index (DXY) is currently perched near the 106.00 mark, reaching its highest level since November. Simultaneously, the yield on the 10-year US Treasury note has surged to 4.55%, a level last witnessed in October 2007. These factors underscore the USD’s robustness, fueled by cautious market sentiment and higher Treasury yields.
Adding to gold’s woes is the growing likelihood of enduring high-interest rates, a consequence of the United States (US) economy’s resilience. This unrelenting strength in the USD is applying downward pressure on non-yielding assets, including Gold.
In a recent development, both US President Joe Biden and one of his senior advisers have issued warnings regarding the looming threat of a federal government shutdown. They have expressed deep concerns about the widespread hardships it could unleash, particularly affecting the food benefits of nearly 7 million low-income women and children.
This revelation hints at a prior agreement between President Joe Biden and House Speaker Kevin McCarthy concerning government spending levels. However, it is worth noting that the Republican-controlled House of Representatives may embark on a path of significant budget cuts this week.
These proposed budget cuts would necessitate approval by the Democratic-controlled Senate, a step anticipated to face rejection. Should both houses fail to reach an agreement on government spending, the nation could find itself on the brink of a partial government shutdown by the upcoming Sunday.
Intriguingly, investors are closely monitoring upcoming macroeconomic releases, including US Consumer Confidence, Durable Goods Orders, Initial Jobless Claims, and the Federal Reserve’s (Fed) preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index. These releases, scheduled for later in the week, carry significant weight as they could offer critical insights into inflationary pressures within the US economy. Moreover, they have the potential to influence the Fed’s monetary policy, thereby impacting the price of Gold.
As the Gold market grapples with a potent cocktail of a resurgent US Dollar and political uncertainty on Capitol Hill, the path ahead remains shrouded in ambiguity. Investors and analysts are bracing for a turbulent week, where economic indicators and political decisions could sway the precious metal’s trajectory.