Gold prices are too high, is it worth worrying about?

While many analysts continue to highlight gold’s potential as the US Federal Reserve (FED) begins a new easing cycle, some have begun to question the remaining momentum in the gold market, especially as the US economy and labor market remain relatively resilient.

Market analysts have observed that the optimistic view on the economy is pushing the yield on the 10-year bond to a three-month high. The yield on the 10-year bond is trading at 4.32%.

Higher bond yields and a stronger US dollar pose significant risks to gold in the near term, said Fawad Razaqzada, market analyst at Forex.

“The opportunity cost of non-yielding assets like gold is becoming increasingly apparent as bond yields surge. Meanwhile, the US election could provide some support, but without significant new momentum, gold buyers may hold off until a clearer correction emerges.

“If yields and the dollar continue to rise, we could see a bearish outlook for gold in the short term as the cost of holding non-yielding assets increases. However, there is no evidence of that yet,” he said.

Prices are likely to remain supported around current levels, said Ricardo Evangelista, senior analyst at ActivTrades, but he added that gains could be limited in the near term.

“Traders are expected to be cautious ahead of some key data releases later in the week. With the US personal consumption expenditure index - considered the Fed’s preferred inflation gauge - scheduled for release, along with GDP figures and key non-farm payrolls data, a slew of factors could influence the Federal Reserve’s interest rate cut plans,” Evangelista said in a note.

“Ultimately, these factors will shape the performance of the USD and bond markets, which are inversely correlated to gold, which will also impact the price of the precious metal,” Evangelista shared.

Despite mixed opinions, most experts still have a positive outlook for gold prices in the coming time. Ole Hansen, head of commodity strategy at Saxo Bank, said that information about US politics is the driving force for new safe-haven demand across commodity markets.

According to Dow Jones Newswires, central banks, especially in emerging markets, have been active buyers as they seek to reduce their dependence on the US dollar. Sustained demand from these institutions has provided significant support for gold prices throughout the year. In addition, many geopolitical hot spots have increased investors' concerns...