Gold Price Slumps as US Dollar Rebounds on Rate Hike Bets and Geopolitical Tensions
The gold price is facing challenges as it struggles to hold above the $4,400 level. Sellers returned early on Tuesday to challenge this critical support, causing the price to fade from its previous recovery from eight-day lows of $4,397.
The US Dollar (USD) has rebounded sharply in a risk-off market environment and rising US Treasury bond yields across the curve. This is driven by increased bets around a September Federal Reserve interest rate hike, with markets pricing in a 66% chance of such a move up from 41% a week ago.
The renewed outbreak of hostilities in the Middle East has revived the geopolitical risk premium among traders, underpinning the safe-haven appeal of the USD and acting as a headwind for the Greenback-denominated bullion. US President Donald Trump threatened further strikes against Iran on Monday after the first exchange of direct attacks in a month.
The key US jobs data releases this week will offer some incentives to Gold traders, including ADP Employment Change and US Nonfarm Payrolls (NFP) due on Wednesday and Friday respectively. Analysts at ING highlight that gold is 'likely to remain sensitive to incoming US inflation and labour market data,' with the near-term outlook still closely tied to the macro data calendar.