Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
Gold halted its decline on Wednesday but stayed near a seven-month low as expectations of the Federal Reserve keeping interest rates higher for longer continued to weigh on investor sentiment.
Spot gold inched up 0.1% to $1,824.79 per ounce by 11:50 a.m. EDT, ending a week-long slump that saw the metal lose 2.1% over a seven-day period. US gold futures fell by 0.1% at $1,839.50 per ounce.
[Click here for an interactive chart of gold prices]
Meanwhile, the benchmark US 10-year bond yield scaled fresh 16-year highs, capping gains in non-yielding assets like bullion.
“If the Fed continue to maintain rates at these levels, gold will continue to be under pressure. I even think prices can fall to $1,750 if they manage to break below $1,800,” Bob Haberkorn, senior market strategist at RJO Futures, told Reuters.
Pressure on gold prices was alleviated after data showed US private payrolls increased far less than expected in September.
The US services sector also slowed in September as new orders fell to a nine-month low, but the pace remained consistent with expectations for solid economic growth in the third quarter.
Gold also benefitted from a softer dollar. The dollar index, which tracks the greenback against six peers, was down 0.2% Wednesday morning.
Focus will now be on the key non-farm payrolls report due on Friday for more clarity on Fed’s rate-hike path.
“If the jobs report comes softer, then that will give gold ammunition to rally,” Haberkorn added.
Markets are now pricing in a 33% chance of another 25-basis point rate hike from the Fed this year, down from 44% before the economic data, according to the CME FedWatch tool.
“Downside risks are likely to persist as the landing points for gold’s key drivers remain uncertain. But we recommend those long (on) the metal to hold, as we expect a recovery,” UBS said in a note, lowering its year-end gold price forecast by $100 to $1,850.
(With files from Reuters)
