Gold (XAU/USD) retreated slightly from its record all-time highs near $2,350 on Monday, but near-term bullish sentiment remains extremely strong due to heavy central bank buying. Gold’s rise persists despite rising US Treasury yields following Friday’s strong Nonfarm Payrolls (NFP) report, which dampened expectations for a near-term Federal Reserve (Fed) pivot toward rate cuts.
Bond Yields Climb, Rate Cut Expectations Shift
10-year US Treasury yields reached four-month highs near 4.45%. Historically, higher bond yields weigh on Gold as they increase the opportunity cost of holding the non-yielding asset. However, this relationship has weakened in recent weeks.
Fed Officials on Rate Cuts
Fed policymakers continue to caution against premature rate cuts, citing the potential for robust labor market conditions to derail progress towards the 2% inflation target. Minneapolis Fed Bank President Neel Kashkari, though not currently a voting member, recently stated that rate cuts are unlikely this year if inflation remains persistent. He further warned that additional rate hikes remain possible if inflation reduction efforts prove insufficient.
Technical Analysis: Gold Near $2,350, Overbought Signals Emerge
Gold maintains upward momentum despite extremely overbought conditions, potentially limiting further short-term gains. Investors may adopt a wait-and-see approach ahead of the release of crucial US inflation data. March 21st’s high of $2,223 offers key support. The 14-period Relative Strength Index (RSI) at 84.00 signals ongoing bullish momentum but with signs of overbought conditions.
