Gold prices have retreated further from the all-time high of $2,450 set on Monday, amid a rebound in the US Dollar and rising US Treasury bond yields as risk sentiment sours. Despite the pullback, downside for gold appears limited as attention turns to upcoming Federal Reserve (Fed) speeches for policy cues.
The week began with a series of Fed officials taking the stage, expressing caution regarding the inflation and interest rate outlook. While rate cuts are still a possibility later this year, expectations for a substantial 75 basis point reduction have significantly diminished. Cleveland Fed President Loretta Mester highlighted the persistent inflation risks, stating that she no longer anticipates three rate cuts in 2024. Similarly, San Francisco Fed President Mary Daly projected a gradual improvement in shelter inflation, but cautioned that progress would be slow.
These cautious statements have bolstered the US Dollar by reducing expectations of aggressive Fed rate cuts, leading to a rebound in US Treasury bond yields and a subsequent retreat in gold prices from their recent highs.
Gold surged to a new peak of $2,450 following reports of a helicopter crash in Iran’s East Azerbaijan province that claimed the lives of Iranian President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian. This geopolitical development initially spurred safe-haven demand for gold.
As trading continues on Tuesday, risk aversion is sustaining safe-haven flows into the US Dollar, applying additional pressure on gold prices. Investors are also awaiting a series of speeches from Fed policymakers, including Vice Chair John Williams and Governor Christopher Waller, which are expected to provide further insights into the Fed’s policy trajectory.
Moreover, gold traders are exercising caution ahead of Wednesday’s release of the Fed meeting minutes and Nvidia’s earnings results, both of which could significantly influence risk sentiment and the US Dollar’s value.