Due to an unexpected significant contraction in New York State's manufacturing activity, the benchmark 10-year U.S. Treasury yield fell, leading to a strong rally in the gold market. On Tuesday, spot gold rose by $14.10, or 0.53%, closing at $2,662.60 per ounce, after reaching an intraday high of $2,668.95. This increase was mainly driven by the decline in U.S. Treasury yields, as non-interest-bearing gold becomes more attractive when yields fall. Additionally, limited gains in the dollar also supported the rebound in gold prices.
The latest report from the New York Federal Reserve showed that the New York State manufacturing index in October sharply declined to -11.9, far below the market expectation of 3.0. The new orders index slid to -10.2, and the shipments index fell to -2.7, both reflecting a significant downturn in manufacturing activity. Analysts noted that the drop in U.S. Treasury yields has provided stability to the gold market, which is currently in an upward consolidation trend. As U.S. bond yields decrease, the market generally expects a further pullback in the dollar.
The gold market is currently showing a robust upward trend, influenced not only by the weak U.S. economic data but also by geopolitical tensions, which are driving the demand for gold as a safe haven. The conflict between Israel and Iran has raised market concerns, and Israel's plans for military action against Iran have further heightened uncertainty in the Middle East. Investors generally believe that in times of increasing political and economic uncertainty, gold's safe-haven characteristics will attract more capital inflows.
Additionally, the market will continue to closely monitor the upcoming U.S. retail sales, industrial production, and initial jobless claims data due this week, which could impact future Federal Reserve policy expectations. According to the CME FedWatch Tool, the market currently expects nearly a 90% chance of a 25 basis point rate cut in November, which is favorable for gold prices. Interest rate cuts typically reduce the opportunity cost of holding gold, further enhancing its appeal.
Amid the current dual uncertainty of economic and geopolitical factors, the safe-haven function of gold has been further highlighted, and investors expect there is still room for gold prices to rise.
