On Tuesday, gold prices in North America fell after reaching a record high of $2,450. They dropped below the April 12 high of $2,431 as the US dollar strengthened. With not much economic data available, traders paid attention to cautious comments from Federal Reserve officials about potential rate cuts.
The gold price (XAU/USD) is now at $2,418, a decrease of 0.28% after hitting a high of $2,433. The rise in US stock markets made gold less appealing as a safe-haven asset. Despite being a popular choice to guard against inflation, investors are hesitant to move away from the lucrative US stock market.
Additionally, Federal Reserve officials continued to signal that they would keep interest rates unchanged until the inflation rate decreases.
However, US Treasury bond yields decreased. The 10-year Treasury note yield fell by 3.5 basis points to 4.41%, and the 10-year TIPS yield, which tends to move opposite to gold prices, decreased by 3 basis points to 2.081%.
According to the Commodities Futures Trading Commission (CFTC), hedge funds increased their positive bets on gold futures to a three-week high by May 14.
The US economic calendar for the week included the release of the latest Federal Reserve meeting minutes on Wednesday. On Thursday, reports on initial jobless claims and the Chicago Fed National Activity Index are expected to show signs of a cooling labor market.
Daily Market Digest: Gold Prices Decline Despite Decreasing US Yields Amid Hawkish Fed Remarks
- Gold prices fell as US Treasury yields declined and the US Dollar weakened. The US Dollar Index (DXY), which measures the dollar against other currencies, remained stable at 104.64, limiting the rise of XAU/USD prices.
- Recent inflation data indicated a slowdown in price increases, leading traders to anticipate a return to looser monetary policies by the US central bank. However, Federal Reserve officials cautioned against interpreting this as a definite signal for rate cuts.
- Atlanta Fed President Raphael Bostic expressed a reluctance to rush into rate reductions, preferring to maintain stability in interest rates to address inflation concerns.
- Fed Governor Christopher Waller noted some progress in April’s Consumer Price Index (CPI) but stressed the need for consistent favorable inflation data before considering a rate cut. Similarly, Michael Barr, the vice-chair of supervision, emphasized the importance of further addressing inflation concerns.
- Vice-Chair Philip Jefferson mentioned the difficulty in predicting when inflation will slow down, highlighting that current policy rates are constraining.
- Cleveland Fed President Loretta Mester suggested that the risks of inflation are tilted towards an increase.
- According to data from the Chicago Board of Trade, investors are expecting a reduction of 35 basis points in Federal Reserve easing by the end of the year.
Technical Analysis: Gold Price Slips Below $2,450 with Bearish Focus on $2,400 Target
