Gold is now down more than 11%. Here’s Why.

The Federal Reserve’s continued hawkish tone, combined with a strong US dollar and rising yields, is having an impact on gold. The US 10-year Treasury yields have reached their highest levels since 2007 this week, and the USD index is currently at its highest since November 2022. The prolonged narrative of higher prices has been subjecting gold to serious pressure, causing a 4% decline in its price last week, making it the most drastic weekly dip since June 2021.

The price of gold has dropped over 11% since it reached a peak of $2,000/oz in May, which is usually not good news for those who hold gold without receiving interest.

This has brought about a substantial decrease in investment interest, which is evident in the considerable decrease in gold ETFs. Since May, these ETFs have been plummeting, and according to Bloomberg’s figures, ETFs saw outflows equivalent to eight tonnes of gold on Monday.

At the same time, hedge funds dealing in Comex futures decreased their bullish gold investments to their lowest point in five weeks. Given the firm stance of Federal Reserve officials suggesting they will maintain restrictive policies for a considerable amount of time, combined with the US dollar and Treasury yields increasing in value, it is probable that gold will encounter more challenges in the fourth quarter.

China’s demand for gold remains stalwart: China has remained the principal purchaser of gold, with the country’s central bank purchasing an additional 29 tonnes in August, making this the tenth consecutive month of such purchases.

China has already imported an impressive 900 tons of gold this year, the highest figure in five years. Following Beijing’s loosening of import restrictions, it is predicted that Chinese demand for gold will continue to grow.