Gold prices edge higher despite rising treasury yields

Gold prices edged higher on Thursday rising above $2,230 per ounce. If gold prices increase, resistance may be encountered at $2,431 per ounce, while if gold prices decline, support may be encountered near $2,290 per ounce. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar edged lower on Thursday, and the index dropped to 105.6. US treasury yields, on the other hand, edged higher, with the US 10-year bond yielding approximately 4.70%. Gold prices remain at record highs, propped up by a strong safety bid, which counterbalances the strength of the US dollar and treasury yields.    

Gold prices have experienced a meteoric rise recently and are trading in overbought territory. Geopolitical tensions raise the appeal of safe-haven assets boosting gold prices. Concerns that the crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets keeping gold prices high. The crisis between Israel and Iran seems to have been diffused for the time being, causing a decline in safe-haven demand and putting pressure on gold prices.

The US Federal Reserve kept interest rates unchanged at its latest policy meeting within a target range of 5.25% to 5.50%. Fed rate cut expectations are affecting gold prices. Rate cut expectations have shifted repeatedly in the past few months and after last week's inflation data markets are not anticipating a rate cut before July. More importantly, a few months ago markets were pricing in over 100 basis points of rate cuts in 2024 markets, which have now dropped to 50 basis points. Market expectations of rate cuts are becoming more moderate as policymakers have stated that they intend to start reducing interest rates slowly. 

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Written by:
Myrsini Giannouli

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