Gold Price in European trade on Wednesday, experienced a significant decline, marking the sixth consecutive session of losses and reaching a two-month low after relinquishing the $2000 threshold.

Factors Driving Gold’s Decline

Impact of US Treasury Yields

The downward trajectory of gold prices can be attributed to mounting pressures stemming from the ascent of US 10-year treasury yields. These yields surged to an 11-week high at 4.332%, exerting downward pressure on non-yielding assets like gold.

US Inflation Data

Bullish US inflation data further compounded the challenges for gold prices. Official reports revealed that consumer prices rose 3.1% year-on-year in January, surpassing estimates and casting doubt on the likelihood of early rate cuts by the Federal Reserve.

Current State of Gold Prices

Gold prices tumbled by 0.2% to $1,988 per ounce, marking the lowest level since December 13th. Despite a session-high briefly touching $1,993, the overall trend indicates a significant downturn, exacerbated by the impact of US inflation data.

Market Sentiment and Rate Expectations

The release of robust US inflation figures has reshaped market sentiment, leading to a recalibration of expectations regarding future interest rate cuts. The probability of a rate cut in March has dwindled to a mere 9%, while expectations for a cut in May have diminished to just 37%.

Revised Projections and Expectations

Traders have revised their outlook for US interest rates, now anticipating four rate cuts totaling 100 basis points for the year. This represents a stark departure from earlier forecasts, which had envisaged six rate cuts amounting to 150 basis points as recently as January.

SPDR Gold Trust Holdings

Against this backdrop of market turbulence, gold holdings at the SPDR Gold Trust witnessed a notable decline. Holdings fell by 1.44 tonnes to reach a total of 840.48 tonnes, marking the lowest level since August 2019.

Conclusion: Navigating Volatility in Gold Markets

As gold price navigate through a period of heightened volatility and uncertainty, investors find themselves grappling with shifting market dynamics and evolving economic indicators. The interplay of factors such as US treasury yields, inflation data, and interest rate expectations underscores the challenges facing gold as a safe-haven asset in the current economic landscape.