Gold Falls Below $4,000 as Rate Hike Speculation Renews
Gold prices fell sharply by more than 2% on Thursday (July 16th), pressured by a strengthening US dollar and rising Treasury yields. The XAU/USD pair traded around US$3,974 per troy ounce, falling back below the psychological level of US$4,000.
Pressure on gold arose as tensions between the United States and Iran rekindled concerns about oil supply disruptions. Although oil prices weakened slightly daily, WTI still recorded a gain of more than 13% throughout July, raising market concerns about the risk of energy inflation resurfacing.
The US dollar also strengthened as investors believed rising energy prices could encourage the Fed to remain cautious about inflation. The US Dollar Index rose around 0.24% to 100.74, approaching the 101.00 area. A stronger dollar makes gold more expensive for holders of other currencies.
US economic data also put additional pressure on gold. Retail Sales rose 0.2% month-on-month in June, in line with expectations, although lower than the 1% increase in May. Meanwhile, Initial Jobless Claims fell to 208,000, lower than the 217,000 forecast, indicating the labor market remains quite solid.
US Treasury yields also moved higher, with the 10-year bond yield increasing almost 3 basis points to 4.577%. Comments from Fed officials also tended to be hawkish, especially after Lorie Logan and Jeffrey Schmid highlighted persistent inflation risks across various goods and services sectors.
As a result, gold remains vulnerable to market pressure as long as the dollar and yields continue to strengthen. The market does expect the Fed to hold interest rates at its July meeting, but the likelihood of a rate hike in October remains quite high. If XAU/USD fails to return above US$4,000, selling pressure could continue, while a rebound could be stronger if the dollar begins to weaken and the risk of energy inflation subsides.
Source: Newsmaker.id
