A crushed US Dollar sends Gold into a rally above $4,400

Gold prices surged above $4,400 on Monday as the US Dollar weakened and US Treasury yields declined, following soft inflation data that dampened expectations of a hawkish Federal Reserve. The XAU/USD traded at $4,422, bouncing off daily lows of $4,367. Meanwhile, the US Dollar Index dipped 0.37% to 99.53, aiding the precious metal.

The US 10-year T-note yield rose 2.5 basis points to 4.718%, hindering Gold's push towards $4,500. Long-term 30-year yields hit 2007 highs. This surge reflects investor concern over rising national debt, long-dated bond sales, and persistent inflation above the Federal Reserve's 2% target for five years. Last week's inflation data sparked a move away from Fed-hawkish bets.

Iran's potential shift from defensive to offensive policy due to stalled US-Iran talks added to the uncertainty. WTI crude oil rose 2.30% to $84.35 per barrel. Geopolitical signals suggest Iran may become more aggressive, adding to the market's apprehension. The Fed's July meeting minutes will provide further insight into monetary policy.

Gold reclaimed the $4,400 level and approached the 100-day SMA at $4,386, with bullish momentum indicated by the Relative Strength Index. To reverse the trend, Gold would need to fall below the 100-day SMA, followed by the July 6 high, 50-day SMA, and $4,100. Central banks, seeking to bolster currencies during instability, are increasing their Gold reserves.

Gold's inverse correlation with the US Dollar and risk assets, and its status as a safe-haven asset, make it a key player in times of uncertainty.