Gold prices drop 0.70% to $2,504 as USD strengthens and Treasury yields rise after Powell’s dovish comments

  • Gold prices fell over 0.70% as the US Dollar gained strength and Treasury yields rose, following remarks from Fed Chair Jerome Powell.
  • US Dollar Index (DXY) up 0.60% to 101.15, driven by 3.841% 10-year Treasury yield, posing a challenge to non-yielding assets like Gold.
  • Market awaits key US data: GDP estimates, Jobless Claims, and core PCE inflation gauge this week.
  • Gold experiences inflows from China but faces pressure from a stronger USD and higher yields.

Gold prices saw a decline of more than 0.70% amid a resurgence of the US Dollar following comments from Fed Chair Jerome Powell signaling potential policy easing due to concerns over a weak labor market. XAU/USD is trading at $2,504 after pulling back from a daily high of $2,529.

Wall Street is trading lower ahead of Nvidia’s fiscal Q2 2025 earnings report, with the US Dollar reaching a three-day high supported by rising US Treasury bond yields. The US Dollar Index (DXY) is at 101.15, up 0.60%.

Despite these factors, Gold remains above $2,500 even as the US 10-year Treasury note yield climbs two basis points to 3.841%, acting as a headwind for the precious metal.

Analysts cited by Reuters mentioned, “We’re seeing a little pressure from a stronger dollar. We’re waiting for more data to drive the market in either direction based on inflationary data.”

Gold prices are expected to rise further post Powell’s speech at Jackson Hole, where he hinted at potential interest rate cuts amid growing confidence in inflation reaching the Fed’s target.

According to the World Gold Council, XAU/USD prices received a slight boost from a net inflow of 8 metric tons ($403 million) last week, mainly driven by North American funds. Additionally, China’s net Gold imports surged by 17% in July, the first increase since March.

This week’s US economic calendar includes the second estimate of Gross Domestic Product (GDP) on Thursday, Initial Jobless Claims for the week ending August 24, and the core Personal Consumption Expenditures Price Index (PCE) on Friday.

Market expectations suggest investors are eyeing potential Fed easing, with the December 2024 Chicago Board of Trade (CBOT) fed funds future rates contract indicating a possibility of 100 basis points of Fed easing this year.

Analysis: How US economic data impacts Gold prices and Fed’s policy decisions

The movement in Gold prices is directly influenced by US economic data releases, particularly GDP estimates, Jobless Claims, and inflation gauges. Weak data could lead to a prolonged Gold price uptrend, fueling speculation of larger rate cuts by the Fed.

Key points to watch for include an expected improvement in Q2 GDP figures, stable Initial Jobless Claims, and a rise in the core PCE Price Index. The upcoming Nonfarm Payrolls report will also play a crucial role in determining the Fed’s decision on interest rates at the September meeting.

Technical outlook: Gold’s uptrend intact despite recent losses

Despite a temporary decline, Gold’s uptrend remains intact, with potential support levels at $2,483 and $2,450 if prices drop below $2,500. On the upside, resistance levels at $2,531 and $2,550 could be tested if Gold maintains its position above $2,500.

Shares: