Gold prices have fallen over 1% during the North American session due to a drop in demand for safe-haven assets. This decline comes as the US Dollar strengthens and US Treasury yields rise. Currently, gold is priced at $3,297, down from a peak of $3,345. Recent trends show improvement in major US stock indices. While the US has imposed tariffs of 25% to 40% on 14 countries, the deadline for these tariffs has been extended to August 1.

Impact of US Treasury Yields on Gold

Rising US Treasury yields are impacting gold prices, as expectations for Federal Reserve rate cuts decrease. According to data from the Chicago Board of Trade, there is an expectation of 48 basis points of easing in 2025. Market participants are eagerly awaiting the Federal Reserve meeting minutes and the upcoming Initial Jobless Claims report. US real yields and the 10-year Treasury note yield both rose by four basis points. The NFIB Small Business Optimism Index dipped slightly to 98.6 in June. Gold ETFs saw their largest inflow in five years, increasing by 397.1 metric tons. Gold is under pressure, with the Relative Strength Index indicating more sellers than buyers. The important level to watch is the June 30 low of $3,246. If this level is broken, it could signal further declines. Gold’s decline of more than 1% during North American hours was largely due to a reduced appetite for safe-haven assets, which usually see higher demand in uncertain times. However, confidence in equities has improved, especially in US indices, leading to higher Treasury yields. As bond yields increase—particularly the 10-year note, which gained four basis points—the cost of holding gold, which generates no interest, becomes less appealing.

Strength of the US Dollar and Its Effects on Gold

The US dollar’s strength is also putting pressure on gold prices. Since gold is priced in US dollars, a stronger dollar makes gold more expensive for foreign buyers. This is not ideal, especially as traders reduce long positions. Gold is currently trading around $3,297, down from a recent high of $3,345. For traders focusing on interest rates, this shift in expectations is crucial. With rate cuts from the Federal Reserve no longer anticipated this year and pushed further into 2025, US yields remain strong. Recent data from Chicago suggests that only 48 basis points of easing might occur next year, which is much lower than earlier predictions. This environment supports dollar strength and weighs on gold. On Wednesday, new insights are expected with the Federal Reserve meeting minutes, followed by Thursday’s jobless claims. While neither report may be significant on its own, together they provide a clearer picture of the Fed’s direction. If jobless claims hold steady and the labor market remains strong, expectations for policy easing may fade further. Technically, the RSI indicates a bearish bias. Market momentum favors sellers, and the June 30 low of $3,246 is a critical level to watch. A close below this could boost confidence among those betting against gold’s recent rally. However, with ETFs seeing their largest inflow in five years—adding 397.1 metric tons—there is a notable counterbalance. Some traders may view this as a long-term strategy or a hedge against unseen risks. Additionally, the slight drop in the NFIB Small Business Optimism Index to 98.6 fits the broader trend. Small businesses often reflect the real economic mood. Even a small dip in optimism contributes to overall caution. Going forward, we should monitor whether buying interest emerges around $3,250 or if yields and dollar strength continue to push prices down. Risks regarding potential policy changes remain, and the tone of the Fed meeting minutes may quickly alter market expectations. We are compiling data, reassessing levels, and observing trading volume to confirm any significant movements. Create your live VT Markets account and start trading now.

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