Gold price rises further to $2,290 as investors ignore higher bond yields.
Fed policymakers see no urgency for rate cuts.
Investors await the US ADP Employment Change, Services PMI, and Fed Powell’s speech.
Gold price (XAU/USD) falls after refreshing all-time highs near $2,290 in Wednesday’s European session on multiple tailwinds. The near-term demand for the precious metal is upbeat due to deepening geopolitical tensions in Eastern Europe and the Middle East regions. Escalating geopolitical tensions have increased demand for safe-haven assets, providing strength to bullions. This is offsetting the impact of higher bond yields and waning Federal Reserve (Fed) rate cut expectations for the June meeting.
10-year US Treasury yields rise to 4.37% as Fed policymakers see no need to hurry for rate cuts due to a strong economic outlook and tight labor market conditions. Cleveland Fed Bank President Loretta Mester, “I think the bigger risk would be to begin reducing the funds rate too early.” Fed’s pivot to rate cuts could tighten the labor market further, which will eventually increase wage growth and revamp inflation. Generally, higher bond yields dampen Gold’s appeal as they increase the opportunity cost of holding investment in the latter.
This week, the major event will be the United States Nonfarm Payrolls (NFP) data, which will be published on Friday. The labor market data will influence market expectations for Fed rate cuts in June.
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