Gold Struggles to Break Through $4,435 Ceiling Amid Fed Rate Shift
Gold prices have been testing their recent ceiling of $4,435 after failing to break through it twice in four sessions. The metal has been on a strong recovery since August, rising by 10.52% over the past month and 33.53% year-over-year.
The move is largely attributed to the Federal Reserve's shift towards reducing inflation without signaling near-term rate hikes. However, this trade has already played out, with hike odds falling from 50% to 35%, resulting in a $383 advance for gold.
Despite this, the precious metal still faces headwinds, particularly from rising nominal and real yields at the long end of the Treasury curve. The 30-year Treasury yield printed 5.323% on Tuesday, its highest level since 2007, which raises the opportunity cost of holding bullion.
Gold's safe-haven demand is also being partially neutralized by the rate consequence of Middle East escalation. The price action suggests that the marginal buyer is trading the Fed, not the war.