Gold prices have fallen for two consecutive months, and gold futures have plummeted to a seven-week low

Monday was a big negative candlestick in the gold market. Spot gold fell as much as 4% to a low of $4,110.55 an ounce. The overall performance of the gold market in September was very weak. The opening price of London gold in September was about $4,448, and it rose to $4,510 in the middle of the month. Then it continued to decline and closed at around $4,157 at the end of the month. The total drop for the whole month was 6.3%.

Gold hit a new high in January, trading at $5,608 an ounce. However, it turned downward afterwards and has since dropped to around $4,100, losing 27% from the peak. The speculative net long position of COMEX gold futures is also being withdrawn, and the position volume has decreased by about 20% within a month. In early September, funds attempted to buy bottom but failed to change the downward trend. The brief rebound in the middle of the month also failed due to lack of support.

The United States rejected the peace agreement proposed by Iran, and the conflict between the two sides remains unresolved. Concerns over the Strait of Hormuz have arisen again. On that day the price of crude oil rose about 3%. Fears of inflation in the market have been fueled by rising energy prices. Higher refining and logistic costs pushed up overall prices. High inflation expectations have forced the market to reevaluate the monetary policy path. Investors are frantically shorting interest-free assets.

The hawkish stance of the Federal Reserve has provided ample ammunition for the bears. The benchmark interest rate has been raised this month. Now, the market has an expected probability of 94% for another interest rate hike in December. Several Federal Reserve officials have released tightening signals. The Federal Reserve raised the benchmark interest rate in September and also hinted that it might increase it in the coming months. This strong expectation of interest rate hikes has caused a significant outflow of funds from the gold futures market.

The US dollar exchange rate has stabilized near its two-month high. The strong dollar has directly increased the cost for overseas buyers to hold precious metals. Gold priced in dollars has become more expensive for investors in non-US currencies. Demand has been suppressed. The rise in US Treasury yields has also been fatal. The increase in the risk-free interest rate has raised the cost of holding gold. Capital has flowed into high-yield bond assets.

Spot silver fell by 4.5% to $61.39 per ounce. Platinum dropped by 2.8% to $1,727.88. Palladium fell by 3.6% to $1,220.65. The entire precious metal futures sector showed a uniform downward trend. Market panic spread rapidly across different varieties.

The strengthening of the US dollar, the rise in Treasury yields, and the intensifying expectation of interest rate hikes all combined to push the precious metals down. Metals with stronger industrial properties, such as silver, even had a greater decline than gold. The demand expectations in industrial fields such as photovoltaics have cooled due to the high-interest-rate environment. The combination of concerns about economic prospects and monetary policy tightening has suppressed the demand expectations for industrial metals.

The ADP employment report, personal consumption expenditure data and non-farm employment figures will be released one after another. These data will determine the next policy pace of the Federal Reserve. The futures markets are in a sensitive window period before the data release. Traders are operating very cautiously. There is a strong sense of market observation. Under the strong data expectations, the volatility of gold prices is likely to remain at a high level.