Dovish Fed Repricing Fails to Lift Gold Amid Rising Treasury Yields

Gold prices struggled to gain momentum on Thursday as rising US Treasury yields and a stronger US Dollar outweighed the dovish Federal Reserve repricing. The XAU/USD pair traded around $4,167, up 0.26% on the day, but its early recovery was limited by the stronger greenback.

The US Dollar Index (DXY) reached a fresh year-to-date high near 101.85, while the benchmark 10-year US Treasury yield rose to around 5.34%, its highest level since 2002. This increased the opportunity cost of holding non-yielding assets like gold, and made it more expensive for buyers using other currencies.

Despite traders scaling back expectations that the Fed would raise interest rates this month following mixed US economic data, higher Treasury yields continued to drive up borrowing costs. The dovish repricing offered some support to gold, but it has done little to prevent the advance in the US Dollar and Treasury yields.

According to TD Securities, the latest PCE and GDP revisions were a 'mixed bag' with hawkish backward adjustments to growth and dovish adjustments to inflation. However, the firm stresses that the underlying trend is the key story, with robust growth and rising inflation risks expected to continue dominating the Fed's outlook.