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Gold steadies after falling to one-week low

Gold futures edged higher in early trade Thursday, steadying after feeling pressure the previous session in response to rising Treasury yields.

Price action

  • Gold for August delivery
    GC00,
    +0.15%

    GCQ23,
    +0.15%
    rose $1.60, or 0.1%, to $1,960 an ounce on Comex.

  • July silver
    SIN23,
    +1.24%
    was up 26.6 cents, or 1.1%, at $23.795 an ounce.

  • July platinum
    PLN23,
    -0.39%
    fell 0.6% to $1,018.80 an ounce, while September palladium
    PAU23,
    -0.89%
    was down 1% at $1,373.50 an ounce.

  • July copper
    HGN23,
    -0.21%
    fell 0.2% to $3.747 a pound.

Market drivers

The Federal Reserve is expected to hold its policy interest rate steady when it meets next week, pausing after a series of rate hikes that have taken the fed-funds rate from near zero to 5% to 5.25% since March 2022. However, expectations that a pause won’t be for long lifted Treasury yields on Wednesday, putting pressure on gold. Higher Treasury yields raise the opportunity cost of holding non-yielding assets.

A rate rise by the Bank of Canada on Wednesday, ending a lengthy pause, underscored fears that U.S. rates may still have room to rise in the face of stubborn inflation, analysts said.

Read: Why U.S. stock-market investors were rattled by the Bank of Canada’s surprise rate hike

Gold is trading near the 100-day moving average around the $1,940 level. Losses could accelerate if that’s violated, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.

“The next reasonable target for gold bears is $1905, the major 38.2% Fibonacci retracement on November to May rally, and which should distinguish between the actual positive medium term trend, and a bearish reversal,” she said.

Many technical analysts pay attention to what’s known as the Fibonacci ratio, attributed to a 13th century Italian mathematician known as Leonardo “Fibonacci” of Pisa. Technical analysts see key retracement targets for a rally from a significant low to a significant peak at 38.2%, 50% and 61.8%, while retracements of 23.6% and 76.4% are seen as secondary targets.

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