Gold prices retraced during Tuesday’s North American session, dipping below the April 12 high of $2,431 after hitting an all-time high of $2,450. The retracement was driven by a recovery in the US Dollar, with the XAU/USD trading at $2,418, down 0.28% after reaching a high of $2,433. Meanwhile, Wall Street indices remained in the green, posing a challenge to gold’s safe-haven status.
Traders focused on cautious commentary from Federal Reserve officials, who signaled no imminent rate cuts despite a light economic calendar. The Fed‘s stance on maintaining interest rates until further disinflation contributed to the dip in gold prices.
Market Dynamics and Economic Indicators
Although US Treasury bond yields edged lower, with the 10-year benchmark note dropping three-and-a-half basis points to 4.41% and the 10-year yield on Treasury Inflation-Protected Securities (TIPS) falling three basis points to 2.081%, gold prices still faced pressure. Typically, lower yields support higher gold prices, as they reduce the opportunity cost of holding non-yielding assets like gold.
Data from the Commodities Futures Trading Commission (CFTC) revealed that hedge funds increased their bullish bets on gold futures to a three-week high as of the week ending May 14. This suggests continued investor confidence in gold despite short-term fluctuations.
Upcoming Economic Data
The upcoming release of the latest Fed meeting minutes on Wednesday and US Initial Jobless Claims on Thursday will provide further insights into the economic landscape. Expectations of a cooling labor market and the Chicago Fed National Activity Index will be closely watched, as they could influence future monetary policy decisions and, consequently, gold prices.
Conclusion
Gold’s retreat below recent highs reflects a complex interplay of recovering US Dollar strength, cautious Fed commentary, and mixed signals from bond yields. While gold remains a sought-after hedge against inflation, investor focus on equity market gains and forthcoming economic data will likely continue to shape its near-term trajectory.
