Gold Struggles for Direction Amid Weaker DXY, Hot Inflation

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Gold futures are struggling to find direction on Tuesday as red-hot but easing inflation, a weaker US dollar, and COVID-19 cases weigh on the metals market. Despite a promising start to 2021, gold prices have been hammered throughout much of the year, with multiple start-and-stop rallies. Can gold remain above the $1,800 mark heading into next year?

October gold futures were unchanged at $1,794.80 per ounce at 14:12 on Tuesday on the COMEX division of the New York Mercantile Exchange. The precious metal has been flat over the last week, leaving its year-to-date loss at around 5.6%.

Silver, the sister commodity to gold, has also struggled significantly this year. November silver futures tumbled $0.148, or 0.61%, to $23.65 an ounce. The white metal has lost 3% over the last week, adding to its 2021 decline of 11%.

The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, dropped 0.18% to 92.51, from an opening of 92.62. A weaker buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

The US Treasury market was mostly in the red, with the benchmark 10-year yield down 0.037% to 1.287%. The one-year bill was unchanged at 0.074%, while the 30-year bond shed 0.042% to 1.862%. Lower yields are typically bullish for the metals market since they reduce the opportunity cost of holding non-yielding bullion.

what is inflation in financial marketAs FX Daily Report confirmed on Tuesday, the US annual inflation rate remained hot in August, surging 5.3% and matching the median estimate. Everything was higher compared to a year ago as food, apparel, shelter, energy, and medical care were more expensive.

“Investors think that inflation will fall over the next 12 months, according to the Bank of America Fund Manager Survey for September. Financial markets also believe that the Federal Reserve will not pull the trigger on slowing the pace of their monthly bond purchases. However, the Fed Bank of New York’s report of consumers’ inflation expectations climbed for the tenth consecutive month to 5.2%.”

Some market analysts remain optimistic about gold in in the final few months of 2021.

“There’s quite a lot to be positive about for gold with elevated inflation and negative real rates but the Fed has cast our eyes more to the point in time where rates will raise and they will start to taper,” independent analyst Ross Norman said to CNBC.

In other metal commodities, October copper futures slid $0.0545, or 1.25%, to $4.3125 per pound. October platinum futures slid $25.80, or 2.69%, to $931.70 per ounce. November palladium futures decreased $127.30, or 6.12%, to $1,956.00 an ounce.

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