Gold near Mid-May Highs as USD Gains from Geopolitical Tensions

Gold prices have been maintaining their bullish tone in the first half of the European session and are trading near mid-May highs. The non-yielding bullion's price is being supported by receding bets for an immediate interest rate hike by the US Federal Reserve (Fed) and softer US Treasury bond yields.

However, persistent geopolitical uncertainties are providing a boost to the safe-haven US Dollar, which in turn is capping gains for gold. Tamer July US inflation data cooled expectations for near-term Fed policy tightening, leading market expectations to shift towards a policy hold at the upcoming September 15-16 FOMC meeting.

US Treasury Secretary Scott Bessent has shown readiness to intervene more aggressively as bond yields moved higher than before the buyback announcement. The US Department of the Treasury announced last Wednesday that it would at least double buyback operations for long-dated government debt starting in September, which is keeping US bond yields depressed below a multi-year peak.

Markets are still pricing in over a 70% chance that the US central bank will raise borrowing costs at least once by the end of this year amid inflation risks stemming from volatile oil prices. The release of the US Personal Consumption Expenditures (PCE) Price Index on Wednesday and Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium are expected to provide some meaningful impetus to the USD and drive the Gold price.