Gold futures on Bursa Malaysia Derivatives ended lower on November 6, pressured by a stronger US dollar and higher US Treasury yields, as investors shift away from safe-haven assets.
Gold futures experienced a notable decline on November 6, with the spot month November 2024 contract dropping to USD 2,741 per troy ounce, down from USD 2,753.50 per troy ounce the previous day. Other contracts, including December 2024 and those for future months in 2025, followed the downward trend, reflecting broader market pressures. This retreat in gold prices comes as the US dollar strengthens and US Treasury yields continue their upward trajectory.
Factors Influencing the Gold Market
According to SPI Asset Management Managing Partner Stephen Innes, a key driver behind the decline in gold futures is the rising strength of the US dollar and the corresponding increase in US Treasury yields. The US dollar’s performance has been stronger, adding pressure to gold, which is often seen as an alternative investment during times of currency volatility.
Additionally, US Treasury yields have been edging higher, reflecting growing investor confidence in government bonds as an attractive investment option. A shift in investor sentiment towards riskier assets such as stocks, particularly following the victory of former US President Donald Trump, has also contributed to reduced demand for safe-haven assets like gold.
“The recent increase in Treasury yields and the strength of the US dollar have certainly weighed on gold,” said Innes in an interview with Bernama. “These factors are part of a broader shift from safer investments to higher-risk assets, a trend we’ve observed since the election.”
Short-Term Pressures or Longer-Term Trends?
Despite the short-term pressures on gold, Innes believes that the current market dynamics could represent a temporary phase. He anticipates that once former President Trump outlines his tariff policies, gold could see renewed interest from investors seeking a hedge against economic uncertainty. Tariff-related volatility, according to Innes, could bring about a new wave of demand for gold as investors flock to the metal once more.
“Once Trump lays out his tariff plans, I expect gold to start rising again,” he explained. “Any resulting economic uncertainty could make it attractive to investors once more.”
Innes added that although the US 10-year Treasury yields had risen by only 11 basis points, market participants remain cautious, holding off on significant moves. Investors are closely watching for a potential interest rate cut by the US Federal Reserve, which could have an impact on both the strength of the dollar and Treasury yields in the short term.
Gold Futures and Trading Volume
The gold futures market saw decreased prices across all major contracts for November, December, and early 2025 delivery. November 2024 futures closed at USD 2,741 per troy ounce, while December 2024 fell to USD 2,753.90 per troy ounce from USD 2,766.40 per troy ounce. Contracts for January, February, and April 2025 all settled lower, further highlighting the downward momentum in the gold market.
Despite the decline in gold prices, trading activity increased, with 19 lots traded on November 6 compared to just nine lots the previous day. Open interest, which reflects the total number of outstanding contracts, also grew from 17 contracts to 26 contracts. These movements indicate that traders are actively participating in the market, possibly positioning themselves for potential price changes in the future.
The State of Physical Gold Prices
In addition to the futures market, physical gold prices have been closely monitored. According to the London Bullion Market Association’s (LBMA) afternoon fix on November 5, the price of physical gold stood at USD 2,742.55 per troy ounce. This figure aligns closely with the futures price for November 2024, indicating a consistent trend in the broader gold market.
The price of physical gold is often seen as a reflection of the underlying demand for the metal, with fluctuations in price serving as a barometer for market sentiment. In this case, the physical gold price held relatively steady compared to the futures market, suggesting that the short-term pressures on gold have not yet significantly impacted long-term investor outlook.
Market Outlook and Investor Strategy
The outlook for gold remains uncertain in the short term, with a range of economic and political factors contributing to the pressure on prices. The US dollar’s strength and the rise in Treasury yields are likely to persist as key factors affecting gold prices in the near future. However, as Innes notes, the possibility of increased market volatility and shifting geopolitical dynamics could reignite investor interest in gold as a safe-haven asset.
“Gold’s long-term role as a hedge against uncertainty remains intact, but for now, we are seeing a market transition as investors turn to riskier assets,” Innes said. “That being said, the evolving political situation and the upcoming Federal Reserve policy decisions will likely have a big impact on where gold goes from here.”
As investors assess the risk-reward dynamics of various asset classes, gold may remain under pressure in the short term. However, any shifts in market sentiment, especially in relation to US economic policies and global trade developments, could result in renewed demand for the precious metal.
Conclusion: Navigating Gold’s Uncertain Future
Gold futures closed lower on November 6, reflecting the impact of a stronger US dollar and higher Treasury yields. While the market faces short-term headwinds, analysts remain cautious about reading too much into the current trend, suggesting that gold may rebound once economic uncertainties, particularly around former President Trump’s policies, begin to influence investor behavior once again.
The increase in trading volume and open interest signals that traders are actively adjusting their positions, keeping a close watch on upcoming economic developments. With the US Federal Reserve’s policy decisions on the horizon and potential tariff announcements looming, the next few weeks could bring further volatility to the gold market.
As always, investors in gold must navigate these uncertain conditions with caution, balancing short-term market fluctuations with the long-term role that gold has historically played as a hedge against economic and political instability.
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