Gold Weakens Below $4,700, Holds in European Session
Gold prices (XAU/USD) remained under pressure during the European session on Wednesday (May 13), trading slightly below $4,700. Selling bias remained limited as there was no strong bearish momentum, but a strengthening US dollar caused gold to continue its decline for a second day.
This was primarily driven by higher-than-expected US inflation data. Headline CPI rose to 3.8% year-on-year in April (nearing a nearly three-year high), while core inflation rose 0.4% (mom) and 2.8% (yoy), moving further away from the Fed's 2% target. Meanwhile, repricing interest rate expectations has the market pricing in a roughly 35% chance of a rate hike by the end of the year, reinforcing the hawkish bias.
These rising policy expectations have also pushed US Treasury yields higher, extending the dollar's rally. Long-term yields briefly touched the 5.0% area, while short-term yields remained near 4%, underscoring the pressure on non-yielding gold. At the same time, inflation concerns are still considered to be supported by high oil prices amid the US-Iran standoff.
From a geopolitical perspective, the deteriorating prospects for a US-Iran peace deal and tensions over the nuclear program and the strategic Strait of Hormuz maintain defensive demand for the dollar as a reserve currency. This dynamic is an additional factor pressuring gold, although historically geopolitical risks can restrain gold's declines when market volatility increases.
However, the absence of follow-through selling has made the market cautious about pursuing further declines after gold corrected from a three-week peak. The next focus will be on the release of the US Producer Price Index (PPI), geopolitical developments, and market participants' attitudes ahead of the planned two-day meeting between US President Donald Trump and Chinese President Xi Jinping, which could potentially influence the direction of the dollar and the short-term movement of XAU/USD. (asd)*
Source: Newsmaker.id
