Gold prices are under pressure from a weaker US dollar, and China’s economic recovery, but uncertainty about the Federal Reserve’s monetary policy is limiting growth.
Economic data suggest the economy is not yet close to recession, giving the Federal Reserve room to continue raising interest rates, despite being thought to be closer to the end of the rate hike cycle than other global central banks.
Traders are monitoring comments from Fed officials ahead of the April 22 blackout before the May 2-3 meeting.
The 10-year Treasury yield rose 8 basis points to 3.602 percent and the two-year U.S. Treasury yield rose 9.3 basis points to 4.196 percent, which typically reflects interest rate expectations.
According to CME’s FedWatch Tool, market expectations for a 25-point hike at the May meeting have risen to more than 86% (up from 78% on Friday).
This is the trigger for the decline of gold.
But on the other hand, China’s economic recovery weakened the dollar
However, gains in gold prices were limited by uncertainty over the US Federal Reserve’s monetary policy stance. Investors sought more clarity on the issue, which affected gold demand.
Despite this, news of China’s economic recovery picked up in the first quarter, with the country’s gross domestic product growing 4.5 percent year-on-year, beating expectations. This development increased demand for riskier assets, which in turn put some pressure on the US dollar and led to gold growth.
From a technical point of view, gold is trading within the ascending channel and is now at the bottom of the channel. The resistance level of 2003.55 is very important and the upward return of the price above this level will bring more buyers into the market. We should wait for the price reaction to the rate of 2003.55.
Overall, gold prices rose on Tuesday due to a combination of factors, including a weaker US dollar and news of China’s economic recovery. However, uncertainty over the US Federal Reserve’s monetary policy stance limited gains in the precious metal.