Federal Reserve Chairman Jerome Powell has already signaled that the pace of rate cuts will slow, increasing market expectations for a 25 basis point rate cut. With inflation still above the Fed's target and the labor market showing resilience, pressure for aggressive rate cuts has eased, weighing on gold.
Strong US dollar and rising government bond yields weigh heavily
Gold's appeal diminished as the dollar rose to a seven-week high on the back of positive employment data. The dollar index ended at 102.487, its best week since September 2022. A strong dollar has made gold more expensive for foreign buyers, contributing to its decline.
Adding to the pressure on gold, U.S. Treasury yields also rose, with the 10-year Treasury yield rising to 3.97%. Higher yields further reduce demand for precious metals, as interest-bearing assets become more attractive compared to non-yielding gold.
Support limited due to geopolitical tensions
Despite the escalating conflict in the Middle East, where tensions between Israel and the Iranian-backed Hezbollah are rising, Kim has been unable to capitalize significantly on the flow of funds to safe havens. Geopolitical risks typically support gold prices, but a stronger US dollar and rising yields have outweighed these concerns.
Analysts such as Philippe Streible of Blue Line Futures said that if the situation in the Middle East worsens further, gold prices could quickly rise towards $2,700. However, in the short term, support for gold remained limited due to geopolitical conditions.
