Gold prices fell below $2,400 on Tuesday, marking the second consecutive day of losses. As of the latest update, XAU/USD is trading at $2,389, down by 0.82%. This decline is attributed to rising US Treasury yields, although tensions in the Middle East have helped mitigate further losses.
Market Recovery Boosts Equities
Financial markets showed signs of recovery on Tuesday. The Nikkei Index rebounded significantly, closing 10% higher after a sharp 12% drop on Monday. This recovery provided a boost to European and US equity indices, which posted solid gains as a result.
US Dollar and Treasury Yields Pressure Gold
The strength of the US Dollar continues to weigh on gold prices. The US Dollar Index (DXY), which measures the dollar’s performance against six major currencies, increased by 0.30% to 102.97. This strength in the dollar presents a challenge for gold, which is priced in dollars.
In addition, elevated US Treasury yields have contributed to the decline in gold. The yield on the US 10-year benchmark note rose by ten basis points to 3.892%. This increase occurs even as traders anticipate a 50-basis point interest rate cut by the Federal Reserve at its upcoming September meeting.
Geopolitical Tensions and Future Gold Prospects
Despite these pressures, geopolitical tensions continue to influence gold prices. Recent attacks by Hezbollah on northern Israel have heightened concerns of escalating conflict. Such developments could potentially drive gold prices higher, with the metal possibly reclaiming the $2,400 mark if the situation worsens.
Federal Reserve Stance on Interest Rates
In central bank news, Federal Reserve policymakers, including San Francisco Fed President Mary Daly, have indicated that the dual mandate risks are now balanced. They remain open to the possibility of lowering borrowing costs in upcoming meetings, which could influence future gold prices and market dynamics.
Related topics:
