In the lead-up to the European session on Friday, the price of gold (XAU/USD) encountered renewed selling pressure, stepping back from the nearly two-week high achieved in the preceding session. The prevailing sentiment among investors suggests a growing belief that the Federal Reserve (Fed) will maintain higher interest rates for an extended period, given persistent inflationary pressures and a resilient economy.
Hawkish remarks from influential Fed officials have solidified these expectations, reinforcing higher US Treasury bond yields and eroding the appeal of the non-yielding gold. The yellow metal, often considered a safe-haven asset, faces headwinds as investors pivot towards riskier assets, evident in the ongoing risk-on rally across global equity markets.
While optimism prevails, there remains a cautious undertone driven by the prospect of heightened geopolitical tensions in the Middle East. The lingering uncertainty in this region could act as a counterforce to the prevailing market optimism.
The US Dollar (USD) is grappling with challenges in attracting significant buying interest, providing a modest cushion for gold prices. Despite this, the overall trend suggests a retreat for gold as investors navigate the landscape of risk-on sentiment.
In conclusion, while external factors may introduce volatility, the XAU/USD appears set to record marginal weekly gains as it contends with the complexities of evolving market dynamics.
