In Wednesday’s European session, the price of gold (XAU/USD) hovered below the $2,400 mark, struggling to reclaim recent all-time highs around $2,430. This hesitation comes as Federal Reserve (Fed) Chair Jerome Powell underscored the commitment to maintaining a restrictive policy stance for an extended period. Powell and his colleagues appear inclined towards keeping interest rates elevated for a prolonged duration, citing stubborn inflationary pressures and robust labor demand.
The outlook for the Fed to sustain higher interest rates benefits the US Dollar and US bond yields. Although 10-year US Treasury yields experienced a slight decline, they remained near a five-month high at approximately 4.70%. The US Dollar Index (DXY), tracking the Greenback’s performance against a basket of major currencies, stabilized after reaching a five-month peak near 106.40.
Meanwhile, escalating tensions in the Middle East continue to provide support for gold. Israel is preparing to retaliate against Iran’s attack, although US President Joe Biden has stated that the United States will not support Israel’s counterattack. US Treasury Secretary Janet Yellen announced on Tuesday that the US administration plans to impose new sanctions on Iran following its assault on Israel. These fresh sanctions could potentially impact Iran’s oil export capabilities.
