Gold Rebounds, US Yields a Challenge
Gold prices strengthened on Tuesday (July 21st) and continued their rise for the second consecutive session. Spot gold, or XAU/USD, was seen moving between US$4,046 and US$4,070 per troy ounce, while the August delivery gold contract rose US$47.50, or 1.2%, to US$4,063.40 per troy ounce.
This strengthening indicates that the US$4,000 area remains a key psychological level for the market. Gold managed to regain ground above this area despite being tested from below on Monday.
Interestingly, gold's rise occurred amid a strengthening US dollar and rising Treasury yields. Typically, this puts pressure on gold because the precious metal does not provide the same yield as bonds.
The US dollar index rose to around 101.03, while the 2-year US Treasury yield was at 4.245% and the 10-year yield rose to 4.621%. This increase in yields reflects the market's continued monitoring of inflation risks and the direction of central bank interest rates.
Gold continues to be supported by geopolitical risks in the Middle East. Remaining high oil prices mitigate inflation concerns, while the market is also monitoring developments in mediation efforts to defuse the US-Iran conflict.
Consequently, gold has the potential to remain strong as long as the US$4,000 level remains intact. However, upside potential could be limited if the US dollar and Treasury yields continue to rise, as expectations of high interest rates remain a major drag on gold. (arl)
Source: Newsmaker.id
