Gold rebounds from eight-week low as traders weigh Fed rate path
Gold price (XAU/USD) rebounds from an eight-week low to near $4,180 during the early Asian session on Wednesday. However, the potential upside for the precious metal might be limited as oil-driven inflation reinforced expectations of tighter monetary policy by the US Federal Reserve (Fed).
Gold prices shook off an eight-week low, hovering near $4,180 early Wednesday. However, the precious metal's upward potential may be constrained due to concerns about tighter monetary policy from the US Federal Reserve (Fed). Traders eagerly awaited clues on whether the central bank would continue raising interest rates to curb inflation.
A stronger US Dollar (USD), higher US Treasury yields, rising energy prices, and inflationary worries bolstered the case for a rate hike. The US 30-Year Treasury Yield hit 5.61% on Tuesday, the highest level since 2002. Meanwhile, the two-year yield fell by up to five basis points, settling around 4.88%. Gold is often seen as a hedge against inflation, but rising interest rates heighten the opportunity cost of holding this non-yielding asset.
Analysts believe the upside may be limited for now, with traders focusing on the upcoming US Personal Consumption Expenditures (PCE) Price Index data and the Nonfarm Payrolls (NFP) report. If US labor market data looks weak, it could put pressure on the US Dollar and boost Gold prices. Technical analysis indicates gold is under near-term pressure, holding below the 100-day simple moving average and the Bollinger Bands' middle line.
Immediate support is at the lower Bollinger band at $4,165, with a break potentially exposing more downside. Gold's inverse correlation with the US Dollar and US Treasuries, along with its role as a safe-haven asset, underscores its importance in global markets.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
