Gold price (XAU/USD) falls to near $4,125 during the early Asian session on Tuesday. The precious metal faces some selling pressure as rising US Treasury yields and expectations of further Federal Reserve interest rate hikes sap demand for the non-yielding metal.
The yellow metal tumbles by over 4% to $4,110, its lowest since August 5, in the previous session as oil prices climbed. The benchmark 10-year US Treasury yields reached their highest since June 2007, before paring gains
Higher energy prices can fuel inflation by raising costs across the economy. Gold is widely viewed as a hedge against inflation, but a high interest rate environment increases the opportunity cost of holding the non-yielding metal.
“The high bond yields and high oil price tandem continue to act as a thorn in gold’s side. Oil prices have risen on mixed signals about oil flows, which is keeping inflation front and centre for investors,” said Tim Waterer, chief market analyst at KCM Trade.
Iranian officials said that only diplomacy can solve its conflict with the US and Israel, after US President Donald Trump stated he rejected an Iranian proposal to reopen the Strait of Hormuz and end the war.
Traders brace for the US Personal Consumption Expenditures (PCE) Price Index and US jobs data later this week for more clues about the US interest rate path. If the reports show weaker than expected outcomes, this could drag the US Dollar (USD) lower and lift the USD-denominated commodity price.
Gold extends weekly decline as higher yields weigh on non-interest-bearing assets
Analysts at Deutsche Bank highlight that gold came under renewed pressure last week, with prices falling “-2.14% (+0.23% Friday), as higher real and nominal yields put downward pressure on precious metals as a non-interest-bearing asset.” The bank notes that while the modest rebound into the weekend partially offset the latest losses, the broader move underscores gold’s vulnerability in an environment of rising real and nominal yields.
Technical Analysis: Gold remains capped under the 100-day SMA
In the daily chart, XAU/USD keeps a bearish near-term tone as price holds beneath the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line. The metal also trades below the latest Bollinger lower band, underscoring persistent downside pressure, while the Relative Strength Index (14) around 35 hovers just above oversold territory, hinting at stretched but still weak momentum.
On the topside, initial resistance emerges at the Bollinger lower band near $4,190, followed by the 100-day SMA at $4,300 and the Bollinger middle band at $4,335, where a recovery would start to ease the bearish pressure. A stronger rebound would face a subsequent barrier at the Bollinger upper band around $4,480, and only a sustained break above this area would suggest that XAU/USD is escaping its current downside bias.
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