Gold prices saw a resurgence today, bouncing back from an early dip to $2,330 in the New York session. The precious metal’s upward trajectory was propelled by renewed demand for safe-haven assets, countering the waning speculation of a Federal Reserve (Fed) rate cut.
Traders have significantly scaled back their expectations of a Fed pivot towards rate cuts at the upcoming June meeting. This shift follows the release of the United States Consumer Price Index (CPI) report for March, which revealed core price pressures rising beyond expectations for the third consecutive month.
The robust inflation figures have heightened concerns that US interest rates may persist at elevated levels, ranging between 5.25% and 5.50%, for an extended period. Such a scenario favors interest-bearing assets like US bonds and the US Dollar. Although 10-year US Treasury yields experienced a slight decline to 4.56% during the London session today, they remain close to levels not seen in over four months. Simultaneously, the US Dollar Index (DXY) hovers near a nearly five-month high, around 105.30.
Typically, higher bond yields elevate the opportunity cost of holding non-yielding assets such as Gold. Consequently, Gold prices have retreated from recent all-time highs at $2,365. Nevertheless, the immediate demand for Gold remains robust, buoyed by heightened geopolitical tensions. Concerns about potential direct involvement by Iran in the Israel-Hamas conflict in Gaza have escalated, with reports of the Israeli army planning an incursion into Rafah, where many displaced Palestinians have sought refuge.
Additionally, the anticipation of continued Gold purchases by global central banks is expected to bolster its price. Recent data from the World Gold Council (WGC) revealed that China extended its Gold buying streak into February, marking the 17th consecutive month of such acquisitions.
