In the early New York session on Monday, the price of gold (XAU/USD) extended its downward trajectory, reaching $2,330 as investors adjusted their positions amidst expectations of reduced geopolitical tensions. The precious metal experienced a short-term decline as concerns over further escalation in geopolitical conflicts eased. United States President Joe Biden’s statement affirming that his nation would not support a counterattack from Israel on Iran contributed to this sentiment.
The diminishing likelihood of Federal Reserve (Fed) rate cuts during the June and July meetings, coupled with decreased apprehensions regarding Iran-Israel tensions, exerted downward pressure on gold prices. Fed policymakers have expressed support for maintaining restrictive interest rates until they are convinced that inflation will reach the target rate of 2%.
Additionally, stronger-than-anticipated monthly Retail Sales data for March bolstered bond yields and the US Dollar. According to the US Census Bureau, Retail Sales grew by 0.7%, surpassing expectations of 0.3%. February’s Retail Sales were also revised upwards to 0.9% from the initial estimate of 0.6%. Robust spending by US households has emerged as a significant driver of higher inflation, empowering businesses to increase prices for consumers.
The rally in 10-year US Treasury yields to 4.61% further weighed on the price of gold, as higher bond yields elevate the opportunity cost of holding gold investments. Concurrently, the US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, reached a fresh five-month high at 106.16, adding to the downward pressure on gold prices.
As geopolitical tensions ease and strong economic data from the US continue to influence market sentiment, gold prices are likely to remain under pressure in the near term, with investors closely monitoring developments in geopolitical affairs and central bank policies for further cues on gold’s direction.
