Gold Under Pressure; High Yields and Strong Dollar Limit Upside
Gold prices weakened during Tuesday's trading (Aug 18), snapping a two-session winning streak. XAU/USD traded around US$4,382 per troy ounce—down approximately 0.8%—as a strengthening US dollar and high long-term Treasury yields dampened appetite for the precious metal.
The 10-year US Treasury yield briefly approached 4.75%, while the 30-year yield climbed above 5.30%—its highest level since 2007—before retreating during the US session. High yields increase the opportunity cost of holding gold, an asset that generates no interest income.
The US dollar also regained support. The Dollar Index hovered around 99.60 after previously touching the 99.30 area, its weakest level since early June. Despite the dollar's rebound, its upside potential remains limited as the market continues to anticipate a possible shift toward a more dovish stance by the Federal Reserve should US economic data weaken further.
Additional pressure stemmed from rising oil prices and US-Iran tensions in the Strait of Hormuz. Washington has confirmed it will not renew the expired memorandum of understanding with Iran, while the risk of energy supply disruptions remains high. These conditions keep inflation concerns alive and ensure the possibility of a Fed rate hike has not been entirely ruled out.
However, a softening US labor market and consumer spending, combined with milder inflation, lead the market to price in a roughly 65% probability that the Fed will hold interest rates steady in September. This factor has helped curb further declines in gold prices, causing XAU/USD movements to lean toward a consolidation phase.
Newsmaker Analysis: Gold is currently caught between pressure from high yields and a rebounding dollar, balanced by support from expectations of a Fed rate hold. The US$4,380 level serves as immediate support; a breach here could extend the correction toward the US$4,350–US$4,320 range. Conversely, if buyers can push the price back above US$4,400, the possibility of a rebound toward the US$4,420–US$4,450 range opens up again. The next key focus areas are the FOMC minutes and the latest developments in the Middle East. (arl)
Source: Newsmaker.id
