Gold price retreats after reaching all-time high despite falling US yields

• Gold slumps below $2,430, down 0.28% after reaching an all-time high of $2,450.
• US Treasury yields decline with 10-year TIPS yield dropping three basis points to 2.081%.
• Hedge funds increase bullish bets on Gold futures to a three-week high, capping XAU/USD’s losses.

Gold price retraces during Tuesday’s North American session after hitting an all-time high of $2,450. Yet it retreated below the April 12 high of $2,431 as the Greenback recovers some ground. A scarce economic docket keeps traders leaning on Fedspeak, which remained cautious of signaling the beginning of rate cuts.

The XAU/USD trades at $2,418, down 0.28% after reaching a high of $2,433. Wall Street indices remain in the green, a headwind for the safe-haven status for the golden metal. Even though it’s sought as a “hedge” for inflation, investors seem reluctant to give away profits from the US stock market.

Additionally, officials of the Federal Reserve (Fed) continued to cross the wires and adhere to its stance of keeping interest rates on hold until the disinflationary process evolves.

Despite that, US Treasury bond yields edged lower. The US 10-year benchmark note dropped three-and-a-half basis points to 4.41%, while the 10-year yield on the Treasury Inflation-Protected Securities (TIPS), which correlates inversely to Gold prices, dropped three basis points to 2.081%.

Data from the Commodities Futures Trading Commission (CFTC) showed that hedge funds boosted bullish bets on Gold futures to a three-week high in the week ending May 14.

The US economic docket during the week before the latest Fed meeting minutes was released on Wednesday. On Thursday, US Initial Jobless Claims are expected to show the labor market is cooling, along with the Chicago Fed National Activity Index.

Daily digest market movers: Gold price falls despite falling US yields following hawkish Fed comments

• Gold price retreats amid falling US Treasury yields and a weaker US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s performance against a basket of six other currencies, is virtually unchanged at 104.64, putting a lid on XAU/USD prices.
• Last week’s inflation data showed that underlying prices are easing. That reignited traders' expectations that the US central bank would resume easing policy. However, they must be cautious as Fed officials pushed back against just one reading that inflation is moderating.
• Atlanta Fed President Raphael Bostic stated that he is not in a hurry to reduce interest rates and prefers to keep them steady, emphasizing that the Fed's top priority is still addressing inflation.
• Fed Governor Christopher Waller acknowledged that April’s CPI showed progress but mentioned that he needs to see several months of favorable inflation data before he can support a rate cut. Meanwhile, Michael Barr, the vice-chair of supervision, remarked, "We still need to finish the job on inflation."
• On Monday, Vice-Chair Philip Jefferson said it’s too easy to tell when the disinflation process will resume while stating that the policy rate is restrictive. Cleveland Fed President Loretta Mester stated that inflation risks are tilted to the upside.
• Data from the Chicago Board of Trade shows investors are expecting 35 basis points of Fed easing toward the end of the year.

Technical analysis: Gold price slides below $2,450 as bears target $2,400

Gold’s uptrend remains intact, but a daily close below the May 20 low of $2,407 could pave the way for a pullback. That event could form a ‘dark cloud cover,’ a two-candle chart pattern that implies the XAU/USD can print a leg down before extending its rally.

Momentum is on the back of buyers as depicted by the Relative Strength Index (RSI) in bullish territory. However, the RSI is aiming lower, and once it clears the 50-midline, look for further declines.

On the upside, XAU/USD's first resistance would be the April 12 high of $2,431, followed by the all-time high of $2,450.

Conversely, if XAU/USD retreats below $2,400, that could expose the May 13 low at $2,332, followed by the May 8 low of $2,303. Once those levels are surpassed, the 50-day Simple Moving Average (SMA) at $2,284 will be up next.