Gold shows the worst trend in 6 years, falling 8 days in a row

Gold prices fell for the eighth session in a row, on Wednesday, after Tuesday, prices settled at the lowest level of the month, as strong yields and a strong dollar continued to weigh on the yellow metal.

Market Drivers

Gold prices have fallen for eight consecutive sessions, with benchmark 10-year US Treasury yields hitting their highest level since 2008 this week.

Rising crude oil prices and stronger-than-expected US economic growth are raising concerns that inflation could pick up again, potentially forcing the Federal Reserve and other central banks to keep raising interest rates, which could put pressure on gold prices.

“In the commodities arena, gold has been drifting lower this month, stuck below a short-term downtrend line, as a strong rally in real yields and a rally in the dollar has robbed the precious metal of its luster.”

“One could argue that gold being just 8.5% off all-time highs, despite a sharp spike in real returns, is reassuring in itself, but it’s equally hard to imagine what will push gold higher in the absence of a recession.”

The US dollar index ICE DXY, a measure of the strength of the dollar against a basket of competitors, was almost unchanged on Wednesday at 103.17. However, over the past month it has grown by 3.2%.

In US economic data, new home builds rose 3.9% month-on-month to 1.45 million in July, the government said on Wednesday. The persistent lack of a listing for the sale of existing homes has spurred more homebuyers to consider new homes, prompting homebuilders to ramp up construction of new homes in the US last month.

The Federal Reserve said on Wednesday that US industrial production rose 1% in July after declining in the previous two months. The rebound was offset by a 5.2% increase in auto and parts production.