Gold price falls as US yields surge, pressuring bullion
- Treasury yields near 2007 highs, weighing on non-yielding Gold.
- US-Iran deadlock keeps Oil prices underpinned and inflation risks elevated.
- FOMC minutes could clarify Fed debate after softer US data.
Gold (XAU/USD) retreats on Tuesday as US Treasury yields keep their momentum, while energy prices rise further amid a lack of progress in talks between the US and Iran. XAU/USD trades at $4,364, down over 1.10%.
XAU/USD falls as high yields and Oil risks pressure bullion
The US Dollar Index (DXY), which tracks the performance of the buck’s value against a basket of six currencies, is flat at 99.60. The US 10-year Treasury yield has fallen by more than 1 basis point to 4.712%. Worth noting that US Treasury yields hit their highest levels since 2007, earlier in the session, a headwind for Gold, which bears no interest.
A de-escalation of the conflict seems far from happening after US President Donald Trump said that Iran is unlikely to accept Washington's terms to end hostilities. Meanwhile, Iran is adopting an offensive stance, adding that the Strait of Hormuz will remain closed if Washington doesn’t accept their terms.
Oil prices remained underpinned by uncertainty in the Middle East, which favors a Federal Reserve (Fed) interest rate hike. A weaker-than-expected jobs report and inflation data edging lower forced investors to price out rate hikes in 2026.
Data-wise, US Housing Starts in July fell 12.4% MoM, from June’s 1.415 million to 1.239 million, due to higher mortgage rates, which have spiked since the beginning of the Middle East conflict, and elevated home prices. At the same time, the Federal Reserve reported that Industrial Production for July dipped from the expected 0.3% to 0.2% MoM.
Investors are currently awaiting Wednesday's release of the Federal Reserve's policy meeting minutes for insights into the expected path of future interest rates.
XAU/USD technical analysis: Gold fell below 100-day SMA, eyes on $4,200
Gold prices are once more below the $4,400 mark and fell under the 100-day Simple Moving Average (SMA) of $4,384. Bullish momentum seems to be fading as the Relative Strength Index (RSI) dips lower, an indication that sellers are stepping in.
If XAU/USD dives beneath $4,350, expect a test of $4,300, followed by a drop to the July 6 high at $4,202, followed by the 50-day SMA at $4,146 and $4,100.
For a bullish resumption, the first resistance is the $4,400 mark. Up next lies the $4,450 psychological level, followed by the $4,500 milestone.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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