Gold Steadies as Treasury Yields Ease. Can Fed Minutes Push Gold Towards $4,500?
Gold Steadies as Treasury Yields Ease. Can Fed Minutes Push Gold Towards $4,500?
- Gold steadies after falling 2% yesterday
- Yields ease after reaching multi-decade highs on Tuesday
- FOMC minutes are due at 18:00 GMT
- September rate hike expectations have lowered to 36%
- Gold technical analysis
Gold is steadying after falling almost 2% yesterday, as Treasury yields pull back from recent highs and investors wait for the Fed minutes for further clues over the outlook for monetary policy.
Yields are easing after a global bond sell-off yesterday sent long-term borrowing costs across major economies towards multi-decade highs.
The U.S. 30-year Treasury yield rose to a 19-year high, driven by several factors including oil prices rising towards $90 a barrel, reviving fears of a prolonged inflation shock, mounting fiscal concerns as U.S. government debt approaches $40 trillion, and a more crowded debt market as big tech increasingly turns to foreign debt markets to finance AI investment.
Rising bond yields and oil prices support the U.S. dollar and undermine non-yielding assets, weighing on demand for precious metals. Gold fell 1.8% yesterday, while silver dropped 3%, raising questions over whether the recent bullish run in precious metals has further to go.
While yields have eased back today, this is unlikely to disappear as a market concern while oil prices remain elevated amid the ongoing standoff in the Middle East.
Investors are also increasingly focused on rising U.S. fiscal deficits and the growing volume of government borrowing. The fact that yields have risen even as expectations for further Fed tightening have eased is particularly noteworthy.
It suggests that the move in yields is not simply about monetary policy. Concerns over inflation, government borrowing and the longer-term fiscal outlook are also becoming increasingly important.
Fed minutes could decide the next move
Attention now turns to the release of the minutes from the July FOMC meeting for clues over how policymakers are assessing inflation and the potential path for interest rates.
The minutes come as the market is pricing in a 36% probability of a rate hike in September, down from 57% two weeks ago, following a series of weaker-than-expected U.S. economic data.
The decline in rate hike expectations helped gold recover from below 4100 at the start of the month and remain supported above 4300 and key technical levels.
A dovish interpretation of the minutes could push Treasury yields and the dollar lower, giving gold another opportunity to recover yesterday's losses and retest $4,450.
A break above $4,450 would put $4,500, the psychological level, back in focus.
However, a hawkish tone from policymakers, particularly around the inflation risks from higher oil prices, could push yields higher again and make it harder for gold to sustain the recent rally.
The longer-term rise in Treasury yields also remains an important risk. If yields continue rising because investors are demanding more compensation for inflation and fiscal risks rather than because of tighter Fed policy, the immediate impact on gold could remain negative.
But over a longer horizon, those same fiscal and inflation concerns could strengthen the case for holding gold as a hedge against deteriorating confidence in the U.S. fiscal position.
That leaves gold at an interesting point: the Fed is becoming less of a headwind, but oil and long-term yields are preventing the path towards $4,500 from being straightforward.
Gold technical analysis
Gold broke out of the symmetrical triangle pattern, rising above the 50, 100, and 200 EMAs before running into resistance at $4,450. The price trading above the EMAs, combined with the RSI over 50, keeps buyers hopeful of further upside.
Buyers need to break above 4,450 to bring 4,500 into focus. Above here, attention turns to 4765, the May high.
On the downside, the moving averages cluster below as support, with the 100 EMA at 4325, the 200 EMA at 4,290, and the 50 EMA at 4,250. Below, sellers could gain traction toward 4,000, the round number, and 3,940, the 2026 low.
