Gold falls below $4,300 as higher US yields bolster Fed rate hike bets
Gold price (XAU/USD) tumbles to near $4,295 during the early Asian session on Tuesday. The precious metal faces some selling pressure as rising bond yields and surging energy prices strengthen expectations that the US Federal Reserve (Fed) will raise interest rates this week.
Gold prices dipped below $4,300 in early Asian trading on Tuesday, driven by higher US yields and rising energy costs that boosted expectations of a Federal Reserve interest rate increase. The US 10-year Treasury yield broke the 5% threshold for the first time since 2023 on Monday, amid growing concerns over inflation and the need for additional borrowing by governments and corporations.
This created a headwind for gold, a non-yielding asset. Market sentiment now anticipates a 92.4% probability of a 25 basis points interest rate hike at the September Fed meeting, per the CME FedWatch tool. Typically, rising interest rates negatively impact gold, as it lacks interest payments, making interest-bearing assets more appealing.
The Fed's decision will be closely watched during Wednesday's press conference. Strategies at OCBC maintain a medium-term bullish outlook for gold, but caution that the upcoming Federal Open Market Committee (FOMC) meeting will determine whether the recovery can continue or if rate hikes will once again weigh on the precious metal.
Gold is currently trading under its 100-day SMA and 20-day Bollinger middle band on the daily chart, signaling a potential resistance level at $4,330 and $4,455. Support for gold lies around the $4,230 lower Bollinger band, with further downside possible if prices break below this level.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
Also reported by 2 other outlets
- Japanese Yen weakens as Fed rate hike looms fxstreet.com
- Fed hike, rising US yields could trigger fresh selloff in Indian stocks economictimes.indiatimes.com
