Gold is defying rising Treasury yields as traders weigh Fed rate cuts and geopolitical tensions. Fed officials are hinting at a rate cut. The market also sees a 70% chance of a 50 basis point cut in September, further bolstering gold’s appeal. Meanwhile, rising geopolitical risks in the Middle East are boosting gold’s safe-haven appeal.
Gold rises on Fed rate cut expectations, geopolitical tensions
Cryptocoin.comAs you’ve been following on , gold rose as investors weighed comments from Fed officials and rising geopolitical risks. Gold prices rose despite a rebound in Treasury yields, illustrating the complex interplay of factors that affect market performance.
San Francisco Fed President Mary Daly said rate cuts could happen this year. However, she did not say anything about the timing or scope. Daly emphasized the importance of not allowing the labor market to slow too much. Chicago Fed President Austan Goolsbee echoed that sentiment, saying the Fed is prepared to “fix” economic problems if necessary. Investors are predicting the Fed will ease 110 basis points this year. They also predict a 70% chance of cutting 50 basis points in September. These expectations are supporting gold prices, as low interest rates generally increase the appeal of low-yielding assets like gold.
Treasury yield movements and economic indicators
Recent U.S. economic data has been mixed, adding to market uncertainty. While the service sector improved in July, weaker-than-expected employment reports have raised concerns about economic growth. The U.S. trade deficit figures for June, due on Tuesday, will be closely watched by market participants for more insight into economic conditions.
The yield on the benchmark 10-year Treasury note rose more than 5 basis points to trade at 3.8371%, rebounding from its lowest level since June 2023. Similarly, the yield on the 2-year Treasury note rose more than 7 basis points to 3.9627%. These yield movements typically have an adverse effect on gold prices. However, gold yields managed to rise despite the recovery.
Geopolitical risks and global market context
Tensions are rising in the Middle East as Israel prepares for a possible attack from Iran following the killing of a Hamas leader. Rapidan Energy chairman Bob McNally warned that tensions are “escalating.” This geopolitical uncertainty is likely to fuel safe-haven demand for gold.
Global markets, including Japanese stocks, showed signs of recovery after a significant decline on Monday. The volatility underscores the complex factors affecting investor sentiment and, in turn, gold prices.
Gold market outlook and technical analysis
Market analyst James Hyerczyk examines the outlook and technical picture of the gold market. The short-term outlook for gold is bullish. If upcoming U.S. economic data is weaker than expected and the Fed adopts a more dovish stance, gold prices could potentially rise to $2,500 or above. The combination of interest rate cut expectations, economic uncertainty and geopolitical tensions is creating a favorable environment for gold to rise. Investors will also be watching data from China, the largest gold consumer, which could influence price action.
The yellow metal is trying to pull back from yesterday’s sharp decline as it turned higher on Tuesday. The market found support at the 50-day moving average at $2,367.18. However, it faces headwinds at $2,477.73 and $2,483.74. Breaking the latter would open the door to a new record. On the downside, the main support is the 50-day MA. Failure to hold that level would put potential target zones at $2,393.69 and $2,277.34 into play. Thus, it could start the ball rolling for further losses.
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