Gold prices retreated on Monday as US Treasury bond yields rose following the Federal Reserve’s decision to maintain unchanged rates and adjust their anticipated rate cuts from three to one later in the year. As a result, XAU/USD traded at $2,317, down 0.63% from the daily high of $2,332.
The precious metal faced pressure as US Treasury bond yields advanced on the back of a persistent hawkish stance from Fed officials. Meanwhile, the US Dollar struggled to gain momentum and remained lackluster in the foreign exchange market.
Over the weekend, Neel Kashkari of the Minneapolis Fed commented on monetary policy, suggesting a plausible scenario of the Fed easing by 25 basis points (bps) in 2024. This forecast supports higher US bond yields, diminishing the attractiveness of holding bullion amidst elevated fed funds rates.
Philadelphia Fed President Patrick Harker also weighed in, forecasting a single rate cut for 2024 if economic conditions unfold as expected. Harker emphasized the current restrictive policy aimed at achieving a 2% inflation target.
Market attention now turns to upcoming economic releases including Retail Sales, Industrial Production, Initial Jobless Claims, and the S&P Global Purchasing Managers Index (PMI). These indicators will provide insights into economic health and potential impacts on gold prices.
According to data from the Chicago Board of Trade (CBOT), market participants anticipate a total easing of 35 bps by the end of 2024 based on the December 2024 fed funds rate contract.
Additionally, news that the People’s Bank of China (PBOC) halted its 18-month bullion buying spree weighed on the precious metal. PBOC gold holdings remained steady at 72.80 million troy ounces in May, reflecting a stabilization in Chinese central bank policy towards gold acquisitions.
