Gold prices held steady near record highs on Wednesday, following a recent peak of US$2,749 per ounce in the previous session. However, the strong U.S. dollar (USD) and rising U.S. Treasury bond yields have kept upward momentum in check.
By 3:10 pm AEDT (4:10 am GMT) spot gold was trading $1.7 or 0.1% lower at US$2,747.3 per ounce.
Gold Prices Impacted by US Election Expectations
The approach of the US presidential election is weighing on gold sentiment, with increasing market expectations for a Donald Trump victory.
Analysts suggest that a potential win could introduce inflationary trade and fiscal policies, likely pushing interest rates higher.
As a result, the market has seen a sell-off in US government bonds, driving yields up across the curve, which traditionally dampens the appeal of non-yielding assets like gold.
Moreover, the Federal Reserve's anticipated gradual approach to cutting interest rates has bolstered US yields.
According to the CME Group's FedWatch tool, markets currently expect a 91% chance of a 25-basis point rate cut in November.
Recent comments from San Francisco Fed President Mary Daly have reinforced this view, as she noted that the economy is in a stronger position, with falling inflation and a more balanced labour market.
Geopolitical Tensions and New Highs for Gold
Despite headwinds from a strengthening USD and climbing Treasury yields, gold prices managed to reach a fresh record high of $2,749, as geopolitical tensions have driven demand for gold as a safe-haven asset.
Additionally, renewed discussions of de-dollarisation, spurred by the ongoing BRICS Summit, have bolstered sentiment for the precious metal.
The BRICS Summit, currently in its second day, has reignited speculation about a potential gold-backed currency to challenge the dominance of the US Dollar.
BRICS countries, which collectively hold approximately 20% of global gold reserves, are at the forefront of these discussions, aiming to reduce dependence on the USD.