Gold prices (XAU/USD) fell below $2,400 on Tuesday, marking a second day of losses as US Treasury yields increased, reflecting an improved market sentiment. Despite this decline, escalating tensions in the Middle East helped limit further losses. At the time of writing, gold is trading at $2,389, down 0.82%.
Financial markets saw a recovery on Tuesday, with Japan’s Nikkei index bouncing back 10% after Monday’s 12% drop. This recovery trend was mirrored in European and US equity markets, which posted significant gains.
Contributing to gold’s decline, the US Dollar remains strong. The US Dollar Index (DXY), which measures the dollar against six major currencies, rose by 0.30% to 102.97.
Additionally, the rise in US Treasury yields has pressured gold prices. The yield on the 10-year US Treasury note increased by ten basis points to 3.892%, even as traders anticipate a 50-basis point interest rate cut by the Federal Reserve at its upcoming September meeting.
Geopolitical tensions also play a role in the gold market. Hezbollah’s recent attacks on northern Israel could lead to further conflict, potentially boosting gold as a safe-haven asset and supporting a return to the $2,400 level.
In central bank news, Federal Reserve officials, including San Francisco Fed President Mary Daly, indicated that the dual mandate risks have balanced out, suggesting a willingness to lower borrowing costs in future meetings.
