Gold Holds Steady Near $4,400 Amid Weakening USD

Gold prices held near $4,400 on Monday, as fading expectations of a Federal Reserve interest rate hike weighed on the US Dollar. The FedWatch tool shows markets now see around a 70% chance that the central bank will keep rates unchanged next month, up from 48% last week.

This shift in expectations follows disappointing US economic releases, including nonfarm payrolls that fell in July and retail sales that declined on a monthly basis. As a result, short-term US Treasury yields have dropped, but longer-dated yields remain near recent highs.

Analysts at DBS Group Research warn that the traditional relationship between US rates and the currency is under strain, citing fading Fed-hike expectations, persistent US fiscal concerns, and elevated US long-term Treasury yields as risks to a stronger USD. They caution that speculators with large short USD positions are standing on fragile ground.