Gold prices (XAU/USD) have dropped below the $2,400 mark on Tuesday, extending their decline for a second consecutive day. This weakness is attributed to a combination of factors, including rising US Treasury yields and an improving market mood, which is diminishing the appeal of safe-haven assets like gold.
Market Drivers:
- Improved Risk Appetite: A rebound in global equity markets, including a significant recovery in the Nikkei, has contributed to a more positive market sentiment, reducing the demand for safe-haven assets.
- Rising US Yields: The 10-year US Treasury bond yield has climbed to 3.892%, increasing the opportunity cost of holding non-yielding assets like gold.
- Middle East Tensions: Despite escalating tensions in the Middle East, gold prices have not seen a significant boost, suggesting that investors are currently prioritizing other market factors.
- Fed Rate Cut Expectations: While expectations of a 50-basis point rate cut by the Federal Reserve in September persist, recent positive economic data and hawkish comments from Fed officials have tempered these expectations somewhat.
Technical Analysis:
Gold prices are currently hovering around $2,360, with the 50-day Simple Moving Average (SMA) acting as a key support level. A break below this level could trigger further declines towards the 100-day SMA at 2342 and a support trendline around $2,316.
On the upside, reclaiming the $2,400 level would be crucial for gold bulls. A break above this resistance could lead to a retest of the psychological $2,450 mark and potentially the August 2 peak at $2,477.
