Gold held near $4,400 an ounce on Tuesday, extending a rebound from the $4,000 area, as softer U.S. economic data cooled bets on another Federal Reserve rate increase and renewed Middle East tensions kept demand for the metal elevated. The advance held even as long-dated Treasury yields climbed to their highest level in almost two decades.
Gold held near the $4,400-an-ounce level on Tuesday, as softer U.S. economic data reduced expectations for Federal Reserve tightening while renewed Middle East tensions supported demand for bullion despite higher Treasury yields. The metal has added about 1.5% over the past two sessions, extending its rebound from the $4,000-an-ounce area.
Fed rate bets cool
Softer U.S. economic data have reduced expectations for another Fed rate increase, weakening the dollar and removing two headwinds that had weighed on gold's earlier correction. Interest-rate swaps no longer fully price in another Fed rate increase before the end of the year, compared with last week, when markets had priced in another hike by year-end. Fewer expected rate increases are generally supportive for non-yielding gold.
Treasury yields climb to two-decade high
At the same time, the yield on 30-year U.S. Treasuries climbed to its highest level in almost two decades, reflecting investor concern over rising government spending, heavy issuance of long-dated debt, and inflation. That unusual combination can still support gold, as investors seek protection from higher government debt burdens even though elevated yields normally make bullion less attractive.
Iran talks stall as MoU lapses
The rally comes as diplomatic efforts between the U.S. and Iran show little sign of a breakthrough. Monday marked 60 days since the two countries signed a memorandum of understanding calling for a wider peace deal, and the framework agreement has effectively collapsed after a series of attacks on ships in the Strait of Hormuz. President Trump said the U.S. is not seeking an extension of the MoU, which expired Monday. Renewed tensions over the strait have kept safe-haven demand for gold in place.
What comes next
Investors will get another look at the Fed's thinking on Wednesday, when minutes from the July policy meeting are due. Attention will then turn to Fed Chairman Kevin Warsh's comments at the Federal Reserve's annual Jackson Hole symposium later this month.
Source: Investing.com
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