Gold prices, represented by XAU/USD, experienced a decline following selling pressure near the significant resistance level of $2,400 during Tuesday’s early American session. The precious metal faced downward pressure as both the US Dollar and Treasury yields continued to strengthen, fueled by robust March United States Retail Sales data, which raised doubts about the timing of potential rate cuts by the Federal Reserve (Fed).
The 10-year US Treasury yields surged to 4.68%, marking a five-month high and signaling market expectations of the Fed initiating key borrowing rate reductions starting from September. Furthermore, traders scaled back their projections, anticipating only two rate cuts instead of the three initially forecasted by the majority of Fed policymakers in the latest dot plot. Concurrently, the US Dollar Index (DXY), tracking the greenback’s performance against a basket of six major currencies, climbed to 106.30.
The uptick in bond yields exerted downward pressure on gold prices by increasing the opportunity cost of investing in the precious metal. Despite this, gold exhibited resilience in recent weeks amidst rising bond yields, attributed partly to ongoing geopolitical tensions in the Middle East. As a safe-haven asset, gold experiences heightened demand from investors and central banks during periods of global economic uncertainty and escalating geopolitical tensions.
