In a shift from its recent upward trend, gold prices experienced a decline for the first time in four trading days, putting a pause on its recovery from three-week lows of $2,013. The setback is attributed to heightened demand for the US Dollar, driven by investors seeking refuge amid escalating geopolitical tensions in the Middle East.
Reports of Iran’s Islamic Revolutionary Guard Corps (IRGC) launching missiles near the US Consulate in Erbil, Iraq, took a toll on risk sentiment. This retaliation follows recent terrorist attacks that claimed nearly 100 lives in the vicinity of the burial site of General Qassem Soleimani.
Additionally, gold prices faced headwinds from an increase in US Treasury bond yields, catching up after the holiday weekend. The rise in bond yields acted as a supporting factor for the advancing US Dollar.
The Greenback capitalized on market apprehensions regarding China’s economic outlook, with upcoming Gross Domestic Product (GDP) and activity data scheduled for release on Wednesday.
All eyes are now on the eagerly awaited speech by US Federal Reserve (Fed) Governor Christopher Waller, scheduled for 16:00 GMT. Waller is expected to address the economic outlook and monetary policy at the Brookings Institution in Washington DC, with audience questions anticipated to follow.
Waller’s previous appearance signaled a dovish policy shift, impacting both the US Dollar and Treasury bond yields. He emphasized that “if inflation consistently declines, there is no reason to insist that interest rates need to remain really high.”
Investor focus will hinge on Waller’s comments, crucial in shaping market expectations for the possibility of a March Fed rate cut. Presently, market indicators suggest approximately 70% odds of the Fed lowering rates in March.
