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Gold Price Falls as US Treasury Yields Recover

  • Gold falls 0.24%, influenced by rising US Treasury yields and a firm Dollar.
  • Mixed US economic data includes a rise in jobless claims and mixed housing data.
  • Fed officials highlight continued inflation challenges and a stable monetary policy stance.

Gold prices fell in the middle of the US session on Thursday, below $2,390, as US Treasury yields recovered and supported the Dollar. Wednesday's US inflation report sponsored the gold metal's rise, but Thursday's data was mixed, which could trigger some profit-taking ahead of the weekend.

XAU/USD is trading at $2.381, down 0.24%. Wall Street continued to trade at or near all-time highs, dampening appetite for safe-haven assets like Gold. US economic data continued to boost gold prices after the number of Americans filing for unemployment benefits rose above estimates, but was lower than the previous reading.

Other data showed that building permits plunged, while housing starts rose in April compared with March, but fell short of forecasts.

Recently, the Philadelphia Fed manufacturing index for May fell from 15.5 to 4, below forecasts, while industrial production in April was unchanged.

Richmond Fed President Thomas Barkin acknowledged that inflation is declining but stressed that “it will take longer” to reach the Fed's target. Cleveland Fed President Loretta Mester expressed her approval of the latest data of CPI, noting that the current monetary policy stance is appropriate as the Fed continues to evaluate upcoming economic data.

Daily Market Summary: Gold Shines as US Yields Fall as Rate Cut Expectations Rise

  • Gold prices are affected by lower US Treasury yields and a weakening dollar. US 10-year Treasury yields are at 4.373% and are up 3 basis points (bps) from their opening level. The DXY rises 0.19% to 104.47.
  • The US Bureau of Labor Statistics (BLS) announced that initial jobless claims rose above estimates of 220,000 and reached 222,000 for the week ending May 11, but were lower than the previous reading of 232,000.
  • US housing starts rose to 1.36 million in April, marking a 5.7% year-over-year increase. However, building permits, which are an indicator of future construction activity, decreased by 3%, falling to a rate of 1.44 million.
  • The Federal Reserve reveals that April industrial production was unchanged at 0% mom, below the March reading and forecasts of 0.1%.
  • On Tuesday, Fed Chair Jerome Powell commented that he expects inflation to continue to decline, but was not as sure about the prospect of disinflation as he had previously been.
  • Wednesday's inflation and retail sales data raised the odds of rate cut expectations from the Federal Reserve. Data from the Chicago Board of Trade indicates that traders expect at least 37 basis points of easing by December 2024.

Technical analysis: Gold retreats from weekly highs as buyers take a breather

Despite retracing below the $2,380 area, Gold's uptrend remains unchanged, with strong momentum on the buyers' side as shown by the RSI indicator. From a market structure standpoint, if XAU/USD falls below the last higher low seen on May 13 at $2,332, that could open the door for a deeper correction.

In that scenario, the next line of defense for buyers would be the May 8 low of $2,303, followed by the 50-day SMA at $2,284.

Conversely, if buyers reclaim the $2,400 level, further gains are expected, putting the year-to-date high at risk. A break of the latter, the immediate supply zone would be the April 19 high at $2,417, followed by the all-time high at $2,431.

Source: Fx Street

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