Gold prices edge higher even as US bond yields rise

Gold prices edged higher on Monday, rising to $2,310 per ounce.  If gold prices rise, resistance may be encountered near $2,390 per ounce, while if gold prices decline, support may be encountered near $2,280 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 higher on Monday and the dollar index rose to 105.1. US treasury yields surged on Monday, with the US 10-year bond yield rising to 4.46% boosting the dollar.

Gold prices are affected by central banks’ interest rates. A restrictive monetary policy hinders economic growth lowering the global economic outlook 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%. 

The uncertainty around the US Fed rate outlook is causing volatility in gold prices. Fed policymakers have expressed that the progress of disinflation in the first quarter of the year was disappointing and that interest rates would need to remain at high levels for longer for inflation to cool sufficiently. 

Market odds of a rate cut at June’s policy meeting next week are almost zero and traders will focus mostly on the Fed’s forward guidance. Odds of a Fed rate cut in September were at 70% early last week, boosting gold prices, but plummeted below 50% on Friday after the release of the US labor report, putting pressure on gold prices.

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. 

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Written by:
Myrsini Giannouli

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