Gold prices fell below the $2,400 mark on Tuesday, trading at $2,389, as rising US Treasury yields and a strengthening US Dollar continued to exert pressure on the precious metal. This marks the second consecutive day of declines for gold, extending a downward trend amid improving market sentiment.
The recent uptick in US Treasury yields has been a significant factor in the gold price drop. The yield on the US 10-year benchmark note climbed by ten basis points to 3.892%, even as traders anticipate a potential 50-bps interest rate cut by the Federal Reserve in September. Additionally, the US Dollar Index (DXY), which measures the greenback’s strength against a basket of six currencies, increased by 0.30% to 102.97, further weighing on gold prices.
Market sentiment improved on Tuesday, with the Nikkei bouncing back by 10% after a steep 12% decline the previous day, contributing to gains in European and US equity indices. This risk-on mood has further reduced gold’s appeal as a safe haven asset.
Despite this, escalating geopolitical tensions in the Middle East, particularly following Hezbollah’s attacks on northern Israel, have introduced some uncertainty. This regional instability could potentially bolster gold’s status as a safe haven, offering some support for the metal.
Federal Reserve policymakers, led by San Francisco Fed President Mary Daly, have indicated that the central bank may lower borrowing costs in upcoming meetings, given the balanced risk to the dual mandate. The Fed’s potential rate cut is anticipated to occur at their September meeting, which could influence gold prices in the near term.
The technical outlook for gold shows a bearish trend as prices hover around $2,360. If gold slips below the 50-day Simple Moving Average (SMA) at $2,366, it could test further support levels, potentially heading towards $2,277. Conversely, a recovery above $2,400 could see gold target the $2,450 resistance mark and beyond.
