At 10:50 GMT, XAU/USD is trading $2750.40, up $1.45 or +0.05%.
Rising interest rates and uncertainty at the Fed support the strength of the dollar
U.S. Treasury yields have risen, with the 10-year yield hitting 4.2316%, a three-month high, as markets reassess the Federal Reserve’s next moves. US economic data continues to show resilience, with job creation and growth suggesting the Fed may not cut rates as aggressively as previously expected. While markets had priced in a cut of a full percentage point in January, expectations have shifted to a cut of just half a point.
This rise in yields has boosted the dollar, which is trading at multi-month highs against major currencies such as the yen and euro. The yen in particular has been under significant pressure and is now trading at 152 per dollar, levels that have prompted warnings from Japanese officials.
Conflicts in the Middle East increase the demand for safe havens
In addition to the economic backdrop, increased geopolitical risks provide further support for gold. The ongoing conflict in the Middle East is pushing investors to seek refuge in safe havens, with gold being the main beneficiary. This has helped the precious metal defy the rising dollar, which would typically limit its upside potential.
The political uncertainty surrounding the US elections, along with the potential for inflationary policies under the Trump administration, is further driving demand for gold. Investors are considering the possibility of higher rates and fiscal stimulus, which could lead to higher inflation, another factor supporting gold as an inflation hedge.
Market Outlook: Bullish sentiment prevails
Despite the possibility of short-term corrections, gold remains in a bullish trend, with strong technical support at the 50-day moving average at $2,589.60. As long as prices remain above this key level, any pullbacks will likely be seen as buying opportunities. However, if the price moves too far away from this support, the market becomes more vulnerable to a short-term correction.