Gold Abandons 2023 Gains On US Recession-Linked Fears

Gold prices dropped to new 6-week lows on Wednesday, erasing almost the last of 2023’s previous 7.2% gains against the Dollar as the US currency rose and New York’s stock markets retreated with bond prices in the face of rising interest-rate expectations across developed-world economies.

Dipping as low as $1832 per ounce, the US gold price fell 2.5% for the week so far as the Dollar Index rose to 103.64, the top of its last 7 weeks’ trading range. The precious metal is trading at $1831.97 per ounce at the time of writing.

New UK data meantime echoed the slower inflation reported by the US and Eurozone for January, helping 10-year Gilt yields slip 0.06 percentage points from yesterday’s 5-week highs of 3.55% per annum.

But German and US borrowing costs rose further, nearing their highest in 2023 to date at 2.45% and 3.77% respectively on 10-year Bunds and Treasuries as betting that the US Federal Reserve will end 2023 with its key overnight interest rate higher than today rose to 9-in-10, up from just 1-in-5 this time a month ago.

With short-term rates rising faster, the gap between 2-year and 10-year US yields widened to a new 4-decade record near 0.9 percentage points, the widest yield curve inversion since 1981.