Gold Pinned Above $1,650, But Recovery Stalls as Dollar Steadies

By Ambar Warrick 

Investing.com-- Gold prices fell slightly on Thursday after recovering sharply from multi-year lows, as markets remained wary of another resurgence in the dollar and Treasury yields.

Spot gold prices fell 0.3% to $1,655.86 an ounce, while gold futures fell 0.3% to $1,664.35 an ounce by 19:35 ET (23:35 GMT). Both instruments surged nearly 2% on Wednesday, logging their best day in two months.

An easing dollar and Treasury yields came as a major boost to metal markets on Wednesday, with the greenback retreating sharply from a 20-year high, while 10-year U.S. Treasury yields fell from a 12-year peak.

But the dollar now appeared to have stemmed some of its losses, and was trading well above its Wednesday lows. It also remained close to its 2022 peaks.  

A rising dollar, propped up by U.S. lending rates, was the biggest headwind to gold prices this year, pulling them off two-year highs and into an extended losing spree. 

Traders are now waiting to see if the decline in the dollar will be sustained, or it's just another blip before more upward movement. The factors that boosted the greenback- elevated inflation and a hawkish Federal Reserve- are still in play.

A slew of Fed officials reiterated this week that the central bank is set to keep raising rates sharply this year, as it struggles to combat inflation reaching a 40-year peak. 

While retaking the $1,650 level is a positive signal for gold, the yellow metal is still trading below the key $1,700 level, making it susceptible to more declines in the near-term. 

Among industrial metals, copper prices fell 0.1% to $3.3780 after recovering nearly 3% from a two-month low in the prior session.

The red metal rose in a broad-based rally triggered by a weakening dollar. But like gold, it remains susceptible to pressure from a recovery in the greenback.

Copper markets are also awaiting Chinese manufacturing activity data, due on Friday. The reading is expected to show an extended slowdown in the world’s largest copper importer, pointing to weakening demand for the red metal. 

Fears of a looming global recession have battered copper prices this year on the prospect of waning demand.