Gold prices experienced a reversal, ending a three-day winning streak and trading lower around $2,050 per troy ounce during Tuesday’s Asian session. The precious metal faced downward pressure as the US Dollar (USD) strengthened, supported by optimistic US bond yields.
The US Dollar Index (DXY) displayed strength, commencing the Tuesday session with a gap-up, hovering around 102.90. Concurrently, the 2-year and 10-year yields on US Treasury coupons stood at 4.20% and 3.99%, respectively, amplifying the appeal of the USD.
Investor confidence in the US Dollar rebounded, fueled by hawkish remarks from Atlanta Federal Reserve (Fed) President Raphael Bostic over the weekend. Bostic’s caution against premature interest rate cuts, citing potential “see-sawing” inflation, contributed to the positive sentiment surrounding the USD.
Geopolitical tensions between Israel and Gaza, extending to the Red Sea with ongoing Houthi attacks on maritime vessels, triggered a shift in market sentiment towards risk aversion. This shift may amplify demand for safe-haven assets like gold.
The market’s focus remains on the US NY Empire State Manufacturing Index for January and a speech by Federal Reserve’s Waller later in the day. These events are expected to provide insights into economic conditions and the central bank’s perspectives, influencing sentiments and decisions within the XAU/USD pair. Traders are keenly observing these developments for potential market impacts.
